<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
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 1, 1999
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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.)
60 East South Temple, Suite 1225
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)
1
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Explanatory Note
On September 16, 1999, Fonix Corporation, a Delaware corporation (the
"Company" or "Fonix"), filed a Current Report on Form 8-K dated as of September
1, 1999, and pertaining to the sale of the operations and a significant portion
of the assets of the Company's HealthCare Solutions Group to Lernout & Hauspie
Speech Products N.V., a Belgian corporation with its principal place of business
in Ieper, Belgium. This Amendment No. 1 is filed to submit
certain pro forma financial information required by Item 7 of Form 8-K.
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information. Page
(1) Fonix Corporation and Subsidiaries Unaudited Pro Forma
Condensed Consolidated Balance Sheet -- June 30, 1999 P-1
(2) Fonix Corporation and Subsidiaries Unaudited Pro Forma
Condensed Consolidated Statement of Operations For the Six
Months Ended June 30, 1999 P-2
(3) Fonix Corporation and Subsidiaries Unaudited Pro Forma
Condensed Consolidated Statement of Operations For the Year
Ended December 31, 1998 P-3
(4) Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements P-4
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: /s/ Douglas L. Rex
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Douglas L. Rex,
Chief Financial Officer
Date: November 15, 1999
2
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Fonix Corporation and Subsidiaries
(A Development Stage Company)
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 1999
<TABLE>
<CAPTION>
Fonix Pro Forma
Corporation Adjustments Pro Forma
Consolidated (Note 2) Consolidated
------------ ----------- ------------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 490,614 $12,588,493 (a) $ 13,079,107
Cash held in escrow - 2,500,000 (a) 2,500,000
Accounts receivable, net of allowance for doubtful
accounts of $73,000 1,024,598 - 1,024,598
Prepaid expenses 76,027 (57,540) (b) 18,487
Inventory 121,968 (114,765) (b) 7,203
Interest and other receivables 24,144 - 24,144
------------ ----------- -------------
Total current assets 1,737,351 14,916,188 16,653,539
Property and equipment, net of accumulated depreciation
of $1,668,089 1,980,322 (239,769) (b) 1,740,553
Intangible assets, net of accumulated amortization of $5,191,162 36,175,894 (18,008,308) (c) 18,167,586
Other assets 134,748 (27,741) (b) 107,007
------------ ----------- -------------
Total assets $ 40,028,315 $(3,359,630) $ 36,668,685
============ =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving notes payable $ 50,000 $ - $ 50,000
Notes payable - related parties 6,673,153 (3,132,236) (d) 3,540,917
Notes payable - other 6,187,556 (5,700,000) (d) 487,556
Accounts payable 3,639,210 - 3,639,210
Accrued liabilities 1,565,316 1,413,452 (e) 2,978,768
Accrued liabilities - related parties 922,407 (20,985) (d) 901,422
Income taxes payable - 250,000 (f) 250,000
Deferred revenues 1,225,593 (1,155,593) (g) 70,000
Capital lease obligation - current portion 28,118 (8,298) (g) 19,820
------------ ----------- -------------
Total current liabilities 20,291,353 (8,353,660) 11,937,693
Capital lease obligation, net of current portion 46,385 (46,385) (g) -
Series C 5% convertible debentures 6,500,000 - 6,500,000
------------ ----------- -------------
Total liabilities 26,837,738 (8,400,045) 18,437,693
------------ ----------- - ------------
Common stock and related repricing rights subject
to redemption; 1,801,802 shares and
repricing rights outstanding (aggregate
redemption value of $2,500,000) 1,830,000 - 1,830,000
------------ ----------- -------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.0001 par value; 100,000,000 shares
authorized;
Series A, convertible; 166,667 shares outstanding
(aggregate liquidation preference of $6,055,012) 500,000 - 500,000
Series D, 4% cumulative convertible; 972,334 shares
outstanding (aggregate liquidation preference of
$20,093,163) 22,718,024 - 22,718,024
Series E, 4% cumulative convertible; 43,500 shares
outstanding (aggregate liquidation preference of
$896,390) 1,028,071 - 1,028,071
Common stock, $.0001 par value; 100,000,000 shares
authorized; 69,059,142 shares outstanding 6,906 - 6,906
Additional paid-in capital 93,640,482 - 93,640,482
Outstanding warrants 3,642,750 - 3,642,750
Deficit accumulated during the development stage (110,175,656) 5,040,415 (h) (105,135,241)
------------ ----------- -------------
Total stockholders' equity 11,360,577 5,040,415 16,400,992
------------ ----------- -------------
Total liabilities and stockholders' equity $ 40,028,315 $(3,359,630) $ 36,668,685
============ =========== =============
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
P-1
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Fonix Corporation and Subsidiaries
(A Development Stage Company)
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
Fonix Pro Forma
Corporation Adjustments Pro Forma
Consolidated (Note 2) Consolidated
--------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 1,765,383 $ (1,480,007) (i) $ 285,376
Cost of revenues 354,837 (341,597) (i) 13,240
--------------- --------------- ---------------
Gross margin 1,410,546 (1,138,410) 272,136
--------------- --------------- ---------------
Expenses:
Selling, general and administrative 6,550,472 (1,860,677) (i) 4,689,795
Product development and research 5,318,186 (946,836) (i) 4,371,350
Amortization of goodwill and purchased core technology 2,575,162 (1,259,944) (i) 1,315,218
--------------- --------------- ---------------
Total expenses 14,443,820 (4,067,457) 10,376,363
--------------- --------------- ---------------
Loss from operations (13,033,274) 2,929,047 (10,104,227)
--------------- --------------- ---------------
Interest income 22,046 - 22,046
Interest expense (2,801,421) 268,799 (j) (2,532,622)
--------------- --------------- ---------------
Total other income (expense), net (2,779,375) 268,799 (2,510,576)
--------------- --------------- ---------------
Net loss (15,812,649) 3,197,846 (12,614,803)
Preferred stock dividends (1,429,230) - (1,429,230)
--------------- --------------- ---------------
Net loss attributable to common stockholders $ (17,241,879) $ 3,197,846 $ (14,044,033)
=============== =============== ===============
Basic and diluted net loss per common share $ (0.26) $ (0.21)
=============== ===============
Weighted average common shares outstanding 65,779,527 65,779,527
=============== ===============
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
P-2
<PAGE>
Fonix Corporation and Subsidiaries
(A Development Stage Company)
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Fonix Pro Forma
Corporation Adjustments Pro Forma
Consolidated (Note 2) Consolidated
--------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 2,889,684 $ (284,960) (k) $ 2,604,724
Cost of revenues 76,344 (40,904) (k) 35,440
--------------- -------------- ---------------
Gross margin 2,813,340 (244,056) 2,569,284
--------------- -------------- ---------------
Expenses:
Product development and research 13,620,748 (560,144) (k) 13,060,604
Purchased in-process research and development 13,136,000 (3,821,000) (k) 9,315,000
Selling, general and administrative 12,612,015 (2,082,105) (k) 10,529,910
--------------- -------------- ---------------
Total expenses 39,368,763 (6,463,249) 32,905,514
--------------- -------------- ---------------
Loss from operations (36,555,423) 6,219,193 (30,336,230)
--------------- -------------- ---------------
Interest income 1,075,324 - 1,075,324
Interest expense (1,527,106) 133,213 (l) (1,393,893)
Cancellation of common stock reset provision (6,111,577) - (6,111,577)
--------------- -------------- ---------------
Total other income (expense), net (6,563,359) 133,213 (6,430,146)
--------------- -------------- ---------------
Net loss (43,118,782) 6,352,406 (36,766,376)
Preferred stock dividends (4,797,249) - (4,797,249)
--------------- -------------- ---------------
Net loss attributable to common stockholders $ (47,916,031) $ 6,352,406 $ (41,563,625)
=============== ============== ===============
Basic and diluted net loss per common share $ (0.91) $ (0.79)
=============== ===============
Weighted average common shares outstanding 52,511,185 52,511,185
=============== ===============
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
P-3
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FONIX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
HealthCare Solutions Group - On September 1, 1999, the Company sold the
operations and a substantial portion of the assets of its HealthCare Solutions
Group ("HSG") to Lernout & Hauspie Speech Products N.V. ("L&H"), an unrelated
third party, for $28,000,000, of which $21,500,000 was paid at closing,
$2,500,000 was deposited into escrow with the remaining $4,000,000 to be paid in
two installments of $2,000,000 each over the next two years as a contingent
earn-out based on the performance of HSG.
Pro Forma Financial Statements - The accompanying unaudited pro forma condensed
consolidated balance sheet as of June 30, 1999 presents the financial position
of the Company as if the sale of the HSG had occurred on June 30, 1999. The
accompanying unaudited pro forma condensed consolidated statements of operations
for the six months ended June 30, 1999 and the year ended December 31, 1998
present the results of operations of the Company as if the sale of the HSG had
occurred at the beginning of 1998. The pro forma results have been prepared for
illustrative purposes only and do not purport to be indicative of future results
or what would have occurred had the sale actually been made at the beginning of
1998.
The accompanying unaudited pro forma financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998 and Forms 10-Q for the periods ended June 30, 1999 and March 31, 1999,
and the historical financial statements of Articulate Systems, Inc. (predecessor
of HSG) and the notes thereto included in the Company's Current Report on Form
8-K/A filed on November 16, 1998.
NOTE 2. PRO FORMA ADJUSTMENTS
(a) The Company received $24,000,000 in cash, of which $2,500,000 was
placed in escrow pursuant to the sale agreement. The cash received is
net of payments totaling $8,911,507 which the Company was contractually
required to make towards certain liabilities from the proceeds of the
sale. The contingent earn-out payment of $4,000,000 has not been
reflected in the accompanying condensed consolidated pro forma balance
sheet.
(b) The assets sold included the inventory, property and equipment and
certain prepaid expenses and other assets of the HSG which are
eliminated from the pro forma condensed consolidated balance sheet at
June 30, 1999.
(c) The purchased core technology related to the HSG was sold to L&H and
the related goodwill no longer has value to the Company. These
intangible assets, net of accumulated amortization, have been
eliminated from the pro forma condensed consolidated balance sheet at
June 30, 1999.
(d) The Company was contractually required to make payments toward certain
liabilities from the proceeds of the sale. These payments have been
reflected in the pro forma condensed consolidated balance sheet at June
30, 1999.
P-4
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(e) The Company incurred certain liabilities in connection with the sale of
the HSG which are included in the pro forma condensed consolidated
balance sheet at June 30, 1999. The liabilities incurred are net of
payments of $58,286, which the Company was required to make toward
certain liabilities from the proceeds of the sale.
(f) The Company's income tax liability from the sale of the HSG is
estimated to be $250,000 and is included in the pro forma condensed
consolidated balance sheet at June 30, 1999.
(g) L&H assumed the capital lease obligations of the Company and the
responsibility to complete any contractual obligations related to
certain of the Company's deferred revenues pursuant to the sale
agreement. Accordingly, these liabilities are eliminated from the pro
forma condensed consolidated balance sheet at June 30, 1999.
(h) Records the effect of the net gain on the sale of the HSG.
(i) The operations of the HSG have been eliminated from the pro forma
condensed consolidated statement of operations for the six months ended
June 30, 1999. No consideration has been given to the gain on sale of
the HSG in the pro forma condensed consolidated statement of operations
for the six months ended June 30, 1999 due to the gain being a
non-recurring item directly attributable to the sale.
(j) Reflects the elimination of interest expense of the HSG for the six
months ended June 30, 1999 of which $206,266 related to payments on
certain notes payable which the Company was contractually required to
make from the proceeds of the sale.
(k) The operations of the HSG have been eliminated from the pro forma
condensed consolidated statement of operations from September 2, 1998
(date of acquisition of HSG) through December 31, 1998. No
consideration has been given to the gain on sale of the HSG in the pro
forma condensed consolidated statement of operations for the year ended
December 31, 1998 due to the gain being a non-recurring item directly
attributable to the sale.
(l) Reflects the elimination of interest expense of the HSG for the year
ended December 31, 1998 of which $77,099 related to payments on
certain notes payable which the Company was contractually required to
make from the proceeds of the sale.
P-5
