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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT
Pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 17, 1998
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Fonix Corporation
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
0-23862 22-2994719
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(Commission file number) (I.R.S. Employer Identification No.)
1225 Eagle Gate Tower, 60 East South Temple Street
Salt Lake City, Utah 84111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 328-8700
Not Applicable
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(Former name or former address, if changed since last report)
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EXPLANATORY NOTE
On September 17, 1998, Fonix Corporation, a Delaware corporation (the
"Company" or "Fonix"), filed a Current Report on Form 8-K dated as of September
2, 1998, and pertaining to the Merger of Articulate Systems, Inc., a Delaware
corporation with and into ASI Acquisition Corporation, a wholly-owned subsidiary
of the Company. On November 16, 1998, the Company filed Amendment No. 1 to the
Current Report to submit the audited and unaudited financial statements of
Articulate Systems, Inc., and certain pro forma financial information required
by Item 7 of Form 8-K. This Amendment No. 2 is filed to provide revised pro
forma financial information and related notes to reflect the revised valuation
of purchased in-process research and development. Because the audited and
unaudited financial statements filed with Amendment No. 1 did not change, the
Company is not refiling the audited or unaudited financial statements.
Item 7. Financial Statements and Exhibits. Page
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(b) Pro Forma Financial Information.
Unaudited Pro Forma Condensed Consolidating
Statements of Operations For the Year Ended
December 31, 1997...................................................P-1
Unaudited Pro Forma Condensed Consolidating
Statements of Operations for the Nine Months Ended
September 30, 1998..................................................P-2
Notes to Unaudited Pro Forma Condensed Consolidating
Statements of Operations............................................P-3
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.
Fonix Corporation
By:
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Douglas L. Rex
Chief Financial Officer
Date: June 18, 1999
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Fonix Corporation and Subsidiaries
[A Development Stage Company]
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Articulate Pro Forma
Fonix Systems, Inc. Adjustments Consolidated
Corporation (Note 1) (Note 2) Pro Forma
------------------ -------------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
Revenues $ - $ 920,829 $ - $ 920,829
Cost of revenues - 110,102 - 110,102
------------------ ------------------- ----------------- ------------------
Gross profit - 810,727 - 810,727
------------------ ------------------- ----------------- ------------------
Expenses:
Product development and research 7,066,294 1,315,799 - 8,382,093
Selling, general and administrative 12,947,112 2,368,987 2,486,625 (a) 17,802,724
------------------ ------------------- ----------------- ------------------
Total expenses 20,013,406 3,684,786 2,486,625 26,184,817
------------------ ------------------- ----------------- ------------------
Loss from operations (20,013,406) (2,874,059) (2,486,625) (25,374,090)
------------------ ------------------- ----------------- ------------------
Other income (expense):
Interest income 1,199,610 7,082 - 1,206,692
Interest expense (2,758,288) (83,809) (403,524) (b) (3,245,621)
------------------ ------------------- ----------------- ------------------
Total other expense, net (1,558,678) (76,727) (403,524) (2,038,929)
------------------ ------------------- ----------------- ------------------
Net loss before extraordinary items (21,572,084) (2,950,786) (2,890,149) (27,413,019)
Dividends on preferred stock 2,721,991 - 1,176,712 (e) 3,898,703
------------------ ------------------- ----------------- ------------------
Net loss attributable to common stock-
holders before extraordinary items (24,294,075) (2,950,786) (4,066,861) (31,311,722)
================== =================== ================= ==================
Basic and diluted net loss per common
share $ (0.57) $ (0.66)
================== ==================
Weighted average common shares
outstanding 42,320,188 5,140,751 (c) 47,460,939
================== ================= ==================
</TABLE>
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Fonix Corporation and Subsidiaries
[A Development Stage Company]
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Articulate Pro Forma
Fonix Systems, Inc. Adjustments Consolidated
Corporation (Note 1) (Note 2) Pro Forma
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,671,302 $ 723,040 $ - $ 3,394,342
Cost of revenues 57,353 99,020 - 156,373
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Gross profit
2,613,949 624,020 - 3,237,969
Expenses:
Purchased in-process research and development 13,136,000 - (3,821,000) (d) 9,315,000
Product development and research 10,080,895 1,077,326 - 11,158,221
Selling, general and administrative 8,360,964 1,381,017 1,657,750 (a) 11,399,731
--------------- --------------- -------------- ---------------
Total expenses 31,577,859 2,458,343 (2,163,250) 31,872,952
--------------- --------------- -------------- ---------------
Loss from operations (28,963,910) (1,834,323) 2,163,250 (28,634,983)
--------------- --------------- -------------- ---------------
Other income (expense):
Interest income 856,408 3,630 - 860,038
Interest expense (973,537) (176,276) (269,016) (b) (1,418,829)
Settlement of common stock reset provision (6,111,577) - - (6,111,577)
--------------- --------------- -------------- ---------------
Total other expense, net (6,228,706) (172,646) (269,016) (6,670,368)
--------------- --------------- -------------- ---------------
Net loss (35,192,616) (2,006,969) 1,894,234 (35,305,351)
Preferred stock dividends 2,758,550 - 867,385 (e) 3,625,935
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Net loss attributable to common stockholders $ (37,951,166) $ (2,006,969) $ 1,026,849 $ (38,931,286)
=============== =============== ============== ===============
Basic and diluted net loss per common share $ (0.75) $ (0.71)
=============== ===============
Weighted average common shares outstanding 50,385,468 4,613,494 (c) 54,998,962
=============== ============== ===============
</TABLE>
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Fonix Corporation and Subsidiaries
[A Development Stage Company]
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATING
STATEMENTS OF OPERATIONS
Note 1. Basis of Presentation
The Company created a wholly owned subsidiary for the purpose of acquiring
Articulate Systems, Inc. ("ASI"), a Massachusetts corporation, in September
1998. After the acquisition, the subsidiary changed its name to fonix/Articulate
Systems, Inc. ("fonix/Articulate"). fonix/Articulate is a provider of
sophisticated voice recognition products to specialized segments of the health
care industry. The merger was closed on September 2, 1998, in connection with
which the Company exchanged 5,140,751 shares of restricted common stock (having
a market value of $8,353,720 on that date), cash payment of $7,787,249 and 8.5
percent demand notes in the aggregate amount of $4,747,339 for all of the then
outstanding common shares of ASI. Additionally, the Company issued 98,132 stock
options in exchange for all of ASI's stock options outstanding on the date of
acquisition at an exchange rate based on the relative fair values of the
companies' common stocks. The estimated fair value of the options was $130,000
using the Black-Scholes option pricing method. The ASI acquisition was accounted
for as a purchase. The results of operations of fonix/Articulate have been
included in the historical results of operations of fonix from September 2,
1998, the date of the acquisition.
The excess of the purchase price over the estimated fair market value of the
acquired tangible net assets of ASI was $23,714,256, of which $13,945,000 was
capitalized as purchased core technology, $5,948,256 was capitalized as goodwill
and $3,821,000 was expensed as purchased in-process research and development.
The accompanying unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 1997 and the nine months ended
September 30, 1998, present the results of operations of the Company as if the
acquisition of ASI had occurred on January 1, 1997. The pro forma results have
been prepared for illustrative purposes only and do not purport to be indicative
of the results which would have occurred had the acquisition been effected on
January 1, 1997, nor are they indicative of actual or future operating results.
These unaudited pro forma condensed consolidated statements of operations should
be read in conjunction with the condensed consolidated financial statements and
the notes thereto included in the Company's Quarterly Report on Form 10-Q for
the three and nine months ended September 30, 1998 and the historical financial
statements of ASI and the notes thereto included elsewhere in this report on
Form 8-K/A.
Note 2. Pro Forma Adjustments
(a) Amortization of $13,945,000 in purchased core technology and
$5,948,256 in goodwill, which are being amortized on a
straight-line basis over eight years.
(b) Interest on 8.5 percent demand notes issued to ASI
shareholders for 1997 and from January 1, 1998, through the
date of acquisition.
(c) Issuance of 5,140,751 shares of restricted common stock in
connection with the acquisition. The change in the weighted
average number of common shares outstanding for the nine
months ended September 30, 1998 is the incremental increase
for the period through the date of acquisition.
(d) Purchased in-process research and development in the amount of
$3,821,000 was expensed at the date of the acquisition. This
expense is a non recurring charge directly attributable to the
acquisition and is therefore eliminated from the pro forma
condensed consolidating statement of operations for the nine
months ended September 30, 1998.
(e) Dividends and beneficial conversion features related to the
issuance of Series D 4% Convertible Preferred Stock which were
used to fund the cash portion of the purchase price of ASI.
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