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Previous: SANMINA CORP/DE, 424B3, 1999-12-02 |
Next: MILNE JOHN N, 4, 1999-12-02 |
<PAGE>
______________________________________________________________________________
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:
November 17, 1999
SOURCE MEDIA, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-21894 13-3700438
(State or Other (Commission File (IRS Employer
Jurisdiction Number) Identification No.)
of Incorporation)
5400 LBJ Freeway, Suite 680, Dallas, Texas 75240
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (972) 701-5400
______________________________________________________________________________
<PAGE>
Item 2. Acquisition or Disposition of Assets
On November 17, 1999, we conveyed certain assets relating to our
"VirtualModem" and "Interactive Channel" products and businesses to SourceSuite
LLC, a Delaware limited liability company, in exchange for a 50% ownership
interest in SourceSuite. Insight Interactive, LLC contributed $13 million to
SourceSuite in exchange for a 50% interest in SourceSuite. Upon the formation
of SourceSuite, Insight Interactive acquired 842,105 shares of our common stock,
representing approximately 6% of our issued and outstanding stock, for a
purchase price of $12 million in cash. We also issued to Insight Interactive
five-year warrants to acquire up to 4,596,786 shares of our common stock at an
exercise price of $20.00 per share. Reference is made to the Contribution
Agreement and the Common Stock and Warrants Purchase Agreement, each of which is
incorporated by reference herein, for more detailed information as to the
disposition.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired. Not Applicable.
(b) Pro Forma Financial Information
Unaudited Pro Forma Financial Statements of Source Media, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
As of September 30, 1999
Unaudited Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 1999
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 1998
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 1997
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 1996
(c) Exhibits
2.1 Contribution Agreement dated as of July 29, 1999 by and
among Insight Interactive, LLC, Source Media, Inc., Insight
Communications Company, Inc., SourceSuite LLC and SourceSuite Canada
Inc. (1)
2.2 Common Stock and Warrants Purchase Agreement dated as of July 29, 1999
by and between Source Media, Inc. and Insight Interactive, LLC (1)
__________
(1) Filed as an exhibit to the Definitive Proxy Statement dated September
24, 1999 of Source Media, Inc. and incorporated herein by reference.
2
<PAGE>
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.
Date: December 2, 1999
SOURCE MEDIA, INC.
By: /s/Stephen W. Palley
---------------------
Stephen W. Palley
Chief Executive Officer
<PAGE>
Pro Forma Financial Data
The following unaudited pro forma consolidated balance sheet as of
September 30, 1999 reflects our historical accounts as of that date adjusted to
give pro forma effect to the transaction with Insight as if the transaction had
occurred as of September 30, 1999.
The following unaudited pro forma consolidated statements of operations for
the three fiscal years ended December 31, 1998 and the nine months ended
September 30, 1999 reflect our historical accounts for those periods, adjusted
to give pro forma effect to the transaction with Insight as if the transaction
had occurred as of January 1, 1996.
The pro forma financial data and accompanying notes should be read in
conjunction with the description of the transaction with Insight contained in
the proxy statement dated September 24, 1999 and the Consolidated Financial
Statements and related notes included in our 1998 Annual Report on Form 10-K and
the Form 10-Q for the nine months ended September 30, 1999 previously filed with
the Commission. We believe that the assumptions used in the following statements
provide a reasonable basis on which to present the pro forma financial data.
The pro forma financial data is provided for informational purposes only and
should not be construed to be indicative of our financial condition or results
of operations had the transaction with Insight been consummated on the dates
assumed and are not intended to project our financial condition on any future
date or results of operations for any future period.
<PAGE>
Source Media, Inc.
Pro Forma Consolidated Balance Sheets
(in thousands)
Unaudited
<TABLE>
<CAPTION>
As of September 30, 1999
Pro Forma
Historical Adjustments Pro Forma
------------- ---------------- -------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents 5,768 12,000 (2) 17,768
Restricted investments 6,011 - 6,011
Trade accounts receivable, less allowance -
for doubtful accounts of $742 1,491 - 1,491
Deferred expenses 501 - 501
Prepaid expenses and other current assets 996 - 996
------------- ---------------- -------------
Total current assets 14,767 12,000 26,767
Property and equipment:
Production equipment 6,776 (1,910) (1) 4,866
Computer equipment 3,467 - 3,467
Other equipment 1,401 - 1,401
Furniture and fixtures 656 - 656
------------- ---------------- -------------
12,300 (1,910) 10,390
Accumulated depreciation 8,765 (1,314) (1) 7,451
------------- ---------------- -------------
Net property and equipment 3,535 (596) 2,939
Intangible assets:
Patents 14,945 (14,945) (1) -
Goodwill 6,698 10,790 (3) 17,488
Contract rights 11,933 - 11,933
------------- ---------------- -------------
33,576 (4,155) 29,421
Accumulated amortization 18,266 (12,868) (1) 5,398
------------- ---------------- -------------
Net intangible assets 15,310 8,713 24,023
Investment in joint venture - 5,683 (1) 5,683
Other non-current assets 4,571 - 4,571
------------- ---------------- -------------
Total assets 38,183 25,800 63,983
============= ================ =============
</TABLE>
See accompanying Notes to Pro Forma Consolidated Balance Sheet.
P-2
<PAGE>
Source Media, Inc.
Pro Forma Consolidated Balance Sheets
(in thousands)
Unaudited
<TABLE>
<CAPTION>
As of September 30, 1999
Pro Forma
LIABILITIES Historical Adjustments Pro Forma
------------- --------------- -------------
<S> <C> <C> <C>
Current Liabilities:
Trade accounts payable 826 - 826
Accrued interest 5,000 - 5,000
Accrued payroll 1,101 - 1,101
Other accrued liabilities 4,648 - 4,648
Unearned income 2,352 - 2,352
------------- --------------- -------------
Total current liabilities 13,927 - 13,927
Long-term debt 100,000 - 100,000
Minority interests in consolidated subsidiaries 3,840 - 3,840
Note receivable and accrued interest from minority
stockholder, net of discount of $22 (823) - (823)
------------- --------------- -------------
3,017 - 3,017
Senior redeemable payment-in-kind (PIK) preferred
stock, $25 liquidation preference, $.001 par value,
net of discount Authorized shares - 1,712
in 1997 and 1998, respectively 18,061 - 18,061
Non-participating preferred stock, $.001 par value
Authorized and issued - 1 share - - (4) -
Stockholders' equity (capital deficiency):
Common stock, $.001 par value:
authorized shares - 50,000 and 13,914 shares issued 14 1 (2) 15
Less treasury stock, at cost - 275 shares (2,716) - (2,716)
Capital in excess of par value 84,432 25,799 (2)(3) 110,231
Accumulated deficit (178,552) - (178,552)
------------- --------------- -------------
Total stockholders' equity (capital deficiency) (96,822) 25,800 (71,022)
------------- --------------- -------------
Total liabilities and stockholders' equity (capital deficiency) 38,183 25,800 63,983
============= =============== =============
</TABLE>
See accompanying Notes to Pro Forma Consolidated Balance Sheet.
P-3
<PAGE>
Source Media, Inc.
Pro Forma Consolidated Statements of Operations
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
Pro Forma
Historical Adjustments Pro Forma
------------ --------------- -------------
<S> <C> <C> <C>
Monetary revenues 13,624 (42) (1) 13,582
Nonmonetary revenues 1,437 - 1,437
------------ --------------- -------------
Total revenues 15,061 (42) 15,019
Monetary cost of sales 9,826 (754) (1) 9,072
Nonmonetary cost of sales 1,437 - 1,437
------------ --------------- -------------
Total cost of sales 11,263 (754) 10,509
------------ --------------- -------------
Gross profit 3,798 712 4,510
Selling, general and administrative expenses 18,223 (6,110) (1) 12,113
Amortization of intangible assets 3,709 353 (1)(3) 4,062
Research and development expenses 2,302 (2,302) (1) -
------------ --------------- -------------
24,234 (8,059) 16,175
------------ --------------- -------------
Operating loss (20,436) 8,771 (11,665)
Interest expense 9,621 - 9,621
Interest income (640) - (640)
Other (income) expense (2) 1 (1) (1)
Equity interest in losses of the joint venture - 5,421 (2) 5,421
------------ --------------- -------------
Net loss (29,415) 3,349 (26,066)
Preferred stock dividends 1,433 - 1,433
------------ --------------- -------------
Net loss attributable to common stockholders (30,848) 3,349 (27,499)
============ =============== =============
Basic and dilutive net loss per common share (2.32) n/a (1.95)
============ =============== =============
------------ --------------- -------------
Weighted average common shares outstanding 13,285 842 (4) 14,127
============ =============== =============
</TABLE>
See accompanying Notes to Pro Forma Consolidated Statements of Operations.
P-4
<PAGE>
Source Media, Inc.
Pro Forma Consolidated Statements of Operations
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Year Ended December 31, 1998
Pro Forma
Historical Adjustments Pro Forma
---------------- ---------------- ----------------
<S> <C> <C> <C>
Monetary revenues 24,351 (107) (1) 24,244
Nonmonetary revenues 1,756 - 1,756
---------------- ---------------- ----------------
Total revenues 26,107 (107) 26,000
Monetary cost of sales 12,674 (1,145) (1) 11,529
Nonmonetary cost of sales 1,756 - 1,756
---------------- ---------------- ----------------
Total cost of sales 14,430 (1,145) 13,285
---------------- ---------------- ----------------
Gross profit 11,677 1,038 12,715
Selling, general and administrative expenses 50,708 (6,535) (1) 44,173
Amortization of intangible assets 6,320 475 (1)(3) 6,795
Research and development expenses 3,410 (3,410) (1) -
---------------- ---------------- ----------------
60,438 (9,470) 50,968
---------------- ---------------- ----------------
Operating loss (48,761) 10,508 (38,253)
Interest expense 12,830 - 12,830
Interest income (1,933) - (1,933)
Other (income) expense (27) 13 (1) (14)
Equity interest in losses of the joint venture - 6,634 (2) 6,634
---------------- ---------------- ----------------
Net loss (59,631) 3,861 (55,770)
Preferred stock dividends 2,996 - 2,996
---------------- ---------------- ----------------
Net loss attributable to common stockholders (62,627) 3,861 (58,766)
================ ================ ----------------
Basic and dilutive net loss per common share (5.21) n/a (4.57)
================ ================ ================
Weighted average common shares outstanding 12,012 842 (4) 12,854
================ ================ ================
</TABLE>
See accompanying Notes to Pro Forma Consolidated Statements of Operations.
P-5
<PAGE>
Source Media, Inc.
Pro Forma Consolidated Statements of Operations
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Year Ended December 31, 1997
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Monetary revenues 12,387 (305) (1) 12,082
Nonmonetary revenues 6,044 - 6,044
---------- ----------- ---------
Total revenues 18,431 (305) 18,126
Monetary cost of sales 8,611 (4,325) (1) 4,286
Nonmonetary cost of sales 6,044 - 6,044
---------- ----------- ---------
Total cost of sales 14,655 (4,325) 10,330
---------- ----------- ---------
Gross profit 3,776 4,020 7,796
Selling, general and administrative expenses 19,599 (8,878) (1) 10,721
Amortization of intangible assets 4,987 (537) (1)(3) 4,450
Research and development expenses 3,680 (3,680) (1) -
---------- ----------- ---------
28,266 (13,095) 15,171
---------- ----------- ---------
Operating loss (24,490) 17,115 (7,375)
Interest expense 5,234 - 5,234
Interest income (737) - (737)
Other (income) expense (53) 27 (1) (26)
Equity interest in losses of the joint venture - 9,938 (2) 9,938
Minority interest in earnings(losses) of -
consolidated subsidiaries (9) 5 (4)
---------- ----------- ---------
Net loss before extraordinary item (28,925) 7,145 (21,780)
Extraordinary loss - early extinguishment of debt 3,456 (1,728) 1,728
---------- ----------- ---------
Net loss (32,381) 8,873 (23,508)
Preferred stock dividends 416 - 416
---------- ----------- ---------
Net loss attributable to common stockholders (32,797) 8,873 (23,924)
========== =========== =========
Basic and dilutive net loss per common share:
Net loss attributable to common stockholders
before extraordinary item (2.59) n/a (1.82)
Extraordinary item (0.30) n/a (0.14)
---------- ----------- ---------
Net Loss attributable to common stockholders (2.89) n/a (1.96)
---------- ----------- ---------
Weighted average common shares outstanding 11,354 842 (4) 12,196
========== =========== =========
</TABLE>
See accompanying Notes to Pro Forma Consolidated Statements of Operations.
P-6
<PAGE>
Source Media, Inc.
Pro Forma Consolidated Statements of Operations
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Year Ended December 31, 1996
Pro Forma
Historical Adjustments Pro Forma
---------------- ---------------- ----------------
<S> <C> <C> <C>
Monetary revenues 8,575 (1,033) (1) 7,542
Nonmonetary revenues 9,944 - 9,944
---------------- ---------------- ----------------
Total revenues 18,519 (1,033) 17,486
Monetary cost of sales 3,485 (148) (1) 3,337
Nonmonetary cost of sales 9,944 - 9,944
---------------- ---------------- ----------------
Total cost of sales 13,429 (148) 13,281
---------------- ---------------- ----------------
Gross profit 5,090 (885) 4,205
Selling, general and administrative expenses 11,747 (3,872) (1) 7,875
Amortization of intangible assets 1,031 1,729 (1)(3) 2,760
Research and development expenses 6,331 (6,331) (1) -
---------------- ---------------- ----------------
19,109 (8,474) 10,635
---------------- ---------------- ----------------
Operating loss (14,019) 7,589 (6,430)
Interest expense 614 - 614
Interest income (788) - (788)
Other (income) expense (36) 18 (1) (18)
Equity interest in losses of the joint venture - 5,175 (2) 5,175
Minority interest in earnings(losses) of -
consolidated subsidiaries 46 (23) (1) 23
---------------- ---------------- ----------------
Net loss attributable to common stockholders (13,855) 2,419 (11,436)
================ ================ ================
Basic and dilutive net loss per common share (1.39) n/a (1.06)
================ ================ ================
---------------- ---------------- ----------------
Weighted average common shares outstanding 9,935 842 (4) 10,777
================ ================ ================
</TABLE>
See accompanying Notes to Pro Forma Consolidated Statements of Operations.
P-7
<PAGE>
Footnotes to Unaudited Pro Forma Consolidated Balance Sheet
(In thousands of dollars)
(1) To reflect the elimination of assets and liabilities relating to and
resulting from the operations of the Interactive TV business to be
contributed in the transaction with Insight.
(2) To reflect the net proceeds resulting from and related to the cash received
upon closing the transaction with Insight.
(3) To reflect the net effect of (a) the transfer of patents to SourceSuite
LLC, and (b) the intangible asset created by the issuance of warrants (the
valuation of which is based on the Black-Sholes model), upon closing of the
transaction with Insight.
(4) To reflect the issuance of a new Non-Participating Preferred Stock upon the
closing of the transaction with Insight. The new share of preferred stock
entitles Insight to designate a certain number of members of the Board of
Directors based on Insight's ownership percentage of Source Media, Inc.
common stock, committee representation and preemptive rights to maintain
its ownership percentage.
Footnotes to Unaudited Pro Forma Consolidated Statements of Operations
(In thousands of dollars)
(1) To reflect the elimination of net sales, cost of sales, SG&A and other
income or expense of the Interactive TV segment.
(2) To reflect our 50% interest in the operating losses of SourceSuite LLC.
(3) To reflect amortization of the intangible asset related to the issuance of
warrants to purchase our common stock issued to Insight upon closing the
transaction with Insight, amounting to $2,070 on an annual basis.
(4) To reflect the issuance of additional shares of common stock upon closing
of the transaction with Insight.
P-8
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