SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 event reported): August 17, 2000
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MURDOCK COMMUNICATIONS CORPORATION
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(Exact name of registrant as specified in its charter)
Iowa
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(State or other jurisdiction or incorporation)
000-21463 42-1337746
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(Commission File Number) (I.R.S. Employer I.D. Number)
5539 Crane Lane NE
Cedar Rapids, Iowa 52402
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(Address of Principal Executive Offices) (Zip Code)
319-393-8999
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(Registrant's telephone number; including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
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On August 17, 2000, Murdock Communications Corporation (the "Company")
completed its sale of 100% of the stock of Incomex, Inc. ("Incomex") to John
Rance, Michael Upshaw and Fernando Ficachi (collectively, the "Purchasers"),
three of the former shareholders of Incomex. The effective date of the closing
of the sale was June 30, 2000. The Company originally acquired Incomex in
February 1998. Incomex provides billing and collection services for calls to
the United States from resort hotels in Mexico.
Pursuant to the Purchase Agreement, dated as of June 23, 2000 (the
"Agreement"), among the Company, MCC Acquisition Corp., a wholly owned
subsidiary of the Company ("MCC Sub"), the Purchasers and the other former
shareholders of Incomex, the Purchasers purchased all of the shares of Incomex
from MCC Sub in consideration of (a) the transfer to the Company by the
Purchasers of 250,000 shares of the Company's no par value common stock
originally issued by the Company pursuant to the Company's acquisition of
Incomex, (b) cancellation and forgiveness of all amounts outstanding under
promissory notes in the aggregate principal amount of $684,919 originally issued
by the Company to the shareholders of Incomex in connection with an earn-out
adjustment for the Company's acquisition of Incomex, and (c) the cancellation of
all employment compensation and employment contacts between the Company or MCC
Sub and the Purchasers. The parties also executed mutual releases relating to
liabilities between the Company and Incomex and claims that the Company may have
against the former shareholders of Incomex. The Company retained certain rights
under a contract between Incomex and its largest customer which was terminated
by that customer in February 2000.
The Company is not aware of any material relationship between the
Purchasers and the Company or any of its affiliates, any director or officer of
the Company or any associate of any such director or officer as of the date of
this report, except that (a) John Rance, one of the Purchasers, has served as
Chief Executive Officer of Incomex since April 1997 and served as a director of
the Company from October 1999 to January 2000, (b) the Company was a party to
Employment Agreements with John Rance and Michael Upshaw and (c) the Company has
borrowed $850,000 from John Rance, $850,000 from Michael Upshaw and $500,000
from Fernando Ficahi. These notes remain outstanding, are past due and have
been pledged by the Purchasers to a bank that is currently being liquidated by
the Federal Deposit Insurance Corporation.
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<PAGE>
Item 7. Financial Statements and Exhibits.
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(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
The Unaudited Consolidated Balance Sheet dated June 30, 2000,
contained in the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000, reflects the transaction described in this report. The Unaudited
Statement of Operations for the six months ended June 30, 2000, contained in the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000,
reflects the transaction described in this report and reflects Incomex as a
Discontinued Operation.
The following pro forma financial information relating to the sale
of Incomex by the Company is filed as part of this report:
Page No.
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Unaudited Pro Forma Consolidated
Statement of Operations for the year
ended December 31, 1999 5
(c) Exhibits
2.1- Purchase Agreement, dated as of June 23, 2000, among Murdock
Communications Corporation, MCC Acquisition Corp., John Rance, Michael Upshaw,
Fernando Ficachi, and the other former shareholders of Incomex, Inc.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Murdock Communications Corporation has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
MURDOCK COMMUNICATIONS CORPORATION
Date: August 30, 2000
BY /s/ Paul C. Tunink
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Paul C. Tunink,
Vice President and
Chief Financial Officer
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<PAGE>
MURDOCK COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
The following unaudited pro forma consolidated statement of operations of the
Company gives effect to the disposition of Incomex as if it had occurred on
January 1, 1999. The unaudited pro forma consolidated statement of operations
is presented for illustrative purposes only and is not necessarily indicative of
the consolidated results of operations of the Company that would have been
reported had the disposition occurred on January 1, 1999, nor does it represent
a forecast of the consolidated results of operations of the Company for any
future period. The following unaudited pro forma consolidated statement of
operations is qualified in its entirety by reference to, and should be read in
conjunction with, the historical financial statements and related notes thereto
of the Company contained in its Annual Report on Form 10-KSB for the year ended
December 31, 1999.
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<PAGE>
MURDOCK COMMUNICATIONS CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1999
(Dollars in thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
Year Ended December 31, 1999
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Company Pro-Forma Company
Historical Adjustment (a) Pro-Forma
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<S> <C> <C> <C>
REVENUES:
Call processing . . . . . . . . . . . . . . . . . 32,708 (8,534) 24,174
Other revenue . . . . . . . . . . . . . . . . . . 3,039 - 3,039
------------ --------------- ------------
Total revenues. . . . . . . . . . . . . . . . 35,747 (8,534) 27,213
------------ --------------- ------------
COST OF SALES:
Call processing . . . . . . . . . . . . . . . . . 18,971 (4,371) 14,600
Other cost of sales . . . . . . . . . . . . . . . 1,657 - 1,657
Bad debt expense and universal service fund fees. 11,358 (1,869) 9,489
------------ --------------- ------------
Total cost of sales . . . . . . . . . . . . . 31,986 (6,240) 25,746
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GROSS PROFIT. . . . . . . . . . . . . . . . . . . . 3,761 (2,294) 1,467
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OPERATING EXPENSES:
Selling, general and administrative expense . . . 7,414 (1,852) 5,562
Depreciation and amortization expense . . . . . . 2,358 (23) 2,335
Impairment of property and equipment and
intangible assets. . . . . . . . . . . . . . . . 5,652 - 5,652
AcNet bad debt and acquisition expenses . . . . . 3,703 - 3,703
------------ --------------- ------------
Total operating expenses. . . . . . . . . . . 19,127 (1,875) 17,252
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LOSS FROM OPERATIONS. . . . . . . . . . . . . . . . (15,366) (419) (15,785)
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NONOPERATING INCOME (EXPENSE):
Interest expense. . . . . . . . . . . . . . . . . (3,691) 172 (3,519)
Other income (expense). . . . . . . . . . . . . . 659 (345) 314
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Total nonoperating income (expense) . . . . . (3,032) (173) (3,205)
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LOSS BEFORE INCOME TAX EXPENSE. . . . . . . . . . . (18,398) (592) (18,990)
Income tax expense. . . . . . . . . . . . . . . . - - -
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NET LOSS. . . . . . . . . . . . . . . . . . . . . . (18,398) (592) (18,990)
Dividends and accretion on 8% Series A
Convertible Preferred Stock. . . . . . . . . . . (194) - (194)
------------ --------------- ------------
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS. . . . $ (18,592) $ (592) $ (19,184)
============ =============== ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE . . . . $ (1.79) $ (0.06) $ (1.89)
============ =============== ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING. . . . . 10,392,940 10,142,940 10,142,940
============ =============== ============
<FN>
(a) Revenues and expenses of the Incomex business.
</TABLE>
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