-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ev4aNlAliG3/IEXlbiS+GbK0L3duQBH/BUyl75xB96YOvXX/kbdAMDNoyA37uai8 nPR8H1fXa9svRw/XYz6rdw== 0000950130-99-006844.txt : 19991203 0000950130-99-006844.hdr.sgml : 19991203 ACCESSION NUMBER: 0000950130-99-006844 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991117 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOURCE MEDIA INC CENTRAL INDEX KEY: 0000900029 STANDARD INDUSTRIAL CLASSIFICATION: TELEGRAPH & OTHER MESSAGE COMMUNICATIONS [4822] IRS NUMBER: 133700438 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21894 FILM NUMBER: 99767813 BUSINESS ADDRESS: STREET 1: 5400 LBJ FREEWAY STE 680 CITY: DALLAS STATE: TX ZIP: 75231 BUSINESS PHONE: 9727015400 MAIL ADDRESS: STREET 1: 5400 LBJ FREEWAY STE 680 CITY: DALLAS STATE: TX ZIP: 75231 FORMER COMPANY: FORMER CONFORMED NAME: HB COMMUNICATIONS ACQUISITION CORP DATE OF NAME CHANGE: 19950703 8-K 1 FORM 8-K ______________________________________________________________________________ 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 ______________________________________________________________________________ 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 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 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. Source Media, Inc. Pro Forma Consolidated Balance Sheets (in thousands) Unaudited
As of September 30, 1999 Pro Forma Historical Adjustments Pro Forma ------------- ---------------- ------------- 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 ============= ================ =============
See accompanying Notes to Pro Forma Consolidated Balance Sheet. P-2 Source Media, Inc. Pro Forma Consolidated Balance Sheets (in thousands) Unaudited
As of September 30, 1999 Pro Forma LIABILITIES Historical Adjustments Pro Forma ------------- --------------- ------------- 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 ============= =============== =============
See accompanying Notes to Pro Forma Consolidated Balance Sheet. P-3 Source Media, Inc. Pro Forma Consolidated Statements of Operations (in thousands) Unaudited
Nine Months Ended September 30, 1999 Pro Forma Historical Adjustments Pro Forma ------------ --------------- ------------- 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 ============ =============== =============
See accompanying Notes to Pro Forma Consolidated Statements of Operations. P-4 Source Media, Inc. Pro Forma Consolidated Statements of Operations (in thousands) Unaudited
Year Ended December 31, 1998 Pro Forma Historical Adjustments Pro Forma ---------------- ---------------- ---------------- 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 ================ ================ ================
See accompanying Notes to Pro Forma Consolidated Statements of Operations. P-5 Source Media, Inc. Pro Forma Consolidated Statements of Operations (in thousands) Unaudited
Year Ended December 31, 1997 Pro Forma Historical Adjustments Pro Forma ---------- ----------- --------- 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 ========== =========== =========
See accompanying Notes to Pro Forma Consolidated Statements of Operations. P-6 Source Media, Inc. Pro Forma Consolidated Statements of Operations (in thousands) Unaudited
Year Ended December 31, 1996 Pro Forma Historical Adjustments Pro Forma ---------------- ---------------- ---------------- 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 ================ ================ ================
See accompanying Notes to Pro Forma Consolidated Statements of Operations. P-7 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 -----END PRIVACY-ENHANCED MESSAGE-----