UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
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) November 26, 2001
---------------------------------
Commission file Number 000-26839
SNAP2 CORPORATION
(Exact Name of Registrant as Specified in its Charter)
-------------------------------
Nevada 88-0407246
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10641 Justin Drive
Urbandale, Iowa 50322
(Address of principal executive offices) (Zip Code)
(515) 331-0560
(Registrant's Executive Office Telephone Number)
Item 2. Acquisition or Disposition of Assets
On September 6, 2001 Registrant, together with its wholly-owned subsidiary ISES
Canada Incorporated, a Canadian corporation, entered into an Asset Purchase
Agreement with Inflight Digital Limited, a company incorporated under the laws
of England and Wales ("Buyer"). Pursuant to the Agreement, Registrant and its
subsidiary (collectively "Seller") agreed to sell to the Buyer all of Seller's
inflight entertainment ("IFE") assets comprising its IFE business segment. The
IFE assets include all of Seller's rights and obligations under its contracts
with airline operators for the provision of IFE products and services, Seller's
rights and obligations under license and distribution agreements relating to its
IFE business, Seller's files, books and records relating to its IFE assets and
other tangible property and physical assets used by Seller solely in connection
with IFE business. Seller also granted Buyer a perpetual, royalty free,
exclusive worldwide license to use, for IFE business only, Seller's intangible
properties and rights relating to its IFE business.
The Agreement was entered into prior to the September 11, 2001 terrorist attacks
in the United States and as a result of the terrorist attacks, the Buyer
encountered difficulties in finalizing its financing arrangements to complete
the acquisition of the IFE assets.
As a result, the parties entered into subsequent discussions and negotiations
regarding the proposed sale and on November 26, 2001, the parties entered into
an Amended and Substituted Asset Purchase Agreement pursuant to which the Seller
would sell and license the IFE assets to the Buyer as described above, however,
the Purchase Price has been reduced and the payment of the Purchase Price has
been structured to be completed in phases. The transaction closed on the same
date as the date of the Agreement.
Registrant will continue its business activities as a software developer and
software service provider for embedded systems including set-top boxes for
interactive television and Internet appliances for the consumer electronics
market. Management believes that the sale of the IFE business segment will
enhance Registrant's ability to expand its other business activities.
The total purchase price for the sale and license of the IFE assets is $300,000
plus (i) fifty percent (50%) of all revenue received by Buyer from certain
existing customers for a period of three (3) years; (ii) twenty-five percent
(25%) of all revenues received by Buyer under certain new business generated by
Buyer; (iii) an amount not to exceed $100,000 of the existing contract with
British Airways as assigned to Buyer plus fifty percent (50%) of all revenue
received by Buyer from British Airways during the three (3) years after closing;
and (iv) $75,000 upon receipt of the consent of Air France that it will expand
the number of aircraft using the software and fifty percent (50%) of the
revenues received from Air France during the three (3) years after closing.
Reference is hereby made to Sections 1.6 and 2.1 of the Amended and Restated
Asset Purchase Agreement attached as Exhibit 2 for a description of the various
aspects of the purchase price.
Item 5. Other Events
In connection with the event described in Item 2 above, Registrant acquired 100%
of the issued and outstanding stock of ISES Canada Incorporated, a Canadian
corporation incorporated under the laws of Ontario with its principal office in
Toronto, Canada. ISES Canada Incorporated was affiliated with the Registrant in
that Registrant's controlling shareholder also owned an interest in ISES Canada
Incorporated and Registrant contracted with ISES Canada Incorporated on a
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regular basis for software design and consulting services. The purchase price
for all of the shares of stock of ISES Canada Incorporated was $105,630
(Canadian). ISES Canada Incorporated had previously done software development
work for the Registrant and in order to effectively transfer all rights and
intellectual property included in the sale of Registrant's IFE business segment,
it was deemed necessary to include ISES Canada Incorporated as a Seller and that
the transaction would be facilitated by making this entity a wholly-owned
subsidiary of Registrant.
Item 7. Financial Statements and Exhibits
(b) (1) ProForma Financial Information
UNAUDITED PRO FORMA HISTORICAL FINANCIAL STATEMENTS
The Unaudited Pro Forma Historical Financial Statements for the Registrant give
effect to the Registrant disposing and licensing of the inflight entertainment
("IFE") assets. See Item 2 for description of this transaction.
The following unaudited pro forma statements of operations and pro forma balance
sheet of the Registrant give effect to the disposal and licensing of the IFE
assets as if the transaction had occurred as of the beginning of the period
presented or at the balance sheet date.
The following unaudited pro forma statements of operations and pro forma balance
sheet are based on historical financial data, and on assumptions described in
the notes thereto. All such assumptions and adjustments are inherently subject
to significant uncertainty and contingencies.
The unaudited pro forma historical financial information should be read in
conjunction with the Registrant's financial statements and the related notes
appearing in the Registrant's Annual Report on Form 10-KSB dated December 29,
2000 and Quarterly Report on Form 10-QSB dated August 10, 2001.
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SNAP2 CORPORATION
Unaudited Pro Forma Statement of Operations
For the Nine Months Ended June 30, 2001
Pro Forma
Historical Adjustments Pro Forma
------------ ------------ ------------
Revenue
License fees $ 417,894 $ (126,759)(1) $ 291,135
Consulting 946,617 946,617
Maintenance 40,593 40,593
------------ ------------ ------------
Total revenue 1,405,104 (126,759) 1,278,345
Expenses
Payroll 1,281,561 (25,857)(2) 1,255,704
Payroll taxes 85,417 85,417
Employee health insurance 52,159 52,159
Employer 401(k) contribution 39,191 39,191
Software development and
consulting 169,101 169,101
Administration 252,221 252,221
Interest 31,226 31,226
Travel 88,689 88,689
Marketing 15,533 15,533
Miscellaneous 19,896 19,896
Equipment and office rent 44,072 44,072
Depreciation 18,045 18,045
------------ ------------ ------------
Total expenses 2,097,111 (25,857) 2,071,254
------------ ------------ ------------
Net loss $ (692,007) $ (100,902) $ (792,909)
============ ============ ============
Net loss per share -
Basic $ (0.04) $ (0.00) $ (0.04)
============ ============ ============
Diluted $ (0.04) $ (0.00) $ (0.04)
============ ============ ============
Weighted average shares outstanding -
Basic 17,856,000 17,856,000 17,856,000
============ ============ ============
Fully Diluted 17,856,000 17,856,000 17,856,000
============ ============ ============
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Notes to Unaudited Pro Forma Statement of Operations
for the nine months ended June 30, 2001
The following notes to the pro forma adjustments for the unaudited Statement of
Operations for the nine months ended June 30, 2001 set forth the adjustments
necessary to reflect the disposition and license of IFE assets as if this had
occurred on October 1, 2000.
(1) Reduce the IFE revenue due to the disposal and license of IFE assets.
(2) Eliminate commissions attributable to the IFE assets.
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SNAP2 CORPORATION
Unaudited Pro Forma Balance Sheet
As of June 30, 2001
Pro Forma
Historical Adjustments Pro Forma
----------- ----------- -----------
Assets
Cash and cash equivalents $ 18,961 $ 60,000(1) $ 78,961
Accounts receivable 275,690 275,690
----------- ----------- -----------
Total current assets 294,651 60,000 394,651
Equipment, net of accumulated depreciation 62,654 62,654
Other assets 3,150 3,150
----------- ----------- -----------
Total assets $ 360,455 $ 60,000 $ 420,455
=========== =========== ===========
Liabilities and Stockholders' Deficit
Accounts payable $ 184,410 (140,000)(1) $ 44,410
Accrued payroll and related liabilities 226,872 (100,000)(1) 126,872
Accrued royalty 10,500 10,500
Accrued interest payable 18,766 18,766
Deferred income 101,118 101,118
Line of credit 200,000 200,000
Current portion of long-term debt 41,538 41,538
----------- ----------- -----------
Total current liabilities 783,204 (240,000) 543,204
Long-term debt 183,077 183,077
----------- ----------- -----------
Total liabilities 966,281 (240,000) 726,281
Stockholders' deficit:
Common stock - $0.001 par value; 50,000,000
shares authorized; 17,856,000 shares issued and
outstanding 17,856 17,856
Convertible preferred stock - $0.001 par value;
20,000,000 shares authorized; 10,000 shares
issued and outstanding. Shares convert to
common stock at a ratio of 1,000 shares of
common for each share of convertible preferred
stock on February 28, 2002 10 10
Additional paid-in capital 1,377,648 1,377,648
Accumulated deficit (1,983,690) 300,000(2) (1,683,690)
Unearned compensation (17,650) (17,650)
----------- ----------- -----------
Total stockholders' deficit (605,826) 300,000 (305,826)
----------- ----------- -----------
Total liabilities and stockholders' deficit $ 360,455 $ 60,000 $ 420,455
=========== =========== ===========
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Notes to Unaudited Pro Forma Balance Sheet
As of June 30, 2001
The following notes to the pro forma adjustments for the unaudited Balance Sheet
as of June 30, 2001 set forth the adjustments necessary to reflect the
disposition and license of IFE assets as if this had occurred on June 30, 2001.
(1) Record net cash received from the disposal and license of IFE assets,
after adjustment for payment of certain liabilities.
(2) Record the gain on the disposal and license of IFE assets.
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SNAP2 CORPORATION
Unaudited Pro Forma Statement of Operations
For the Twelve Months Ended September 30, 2000
Pro Forma
Historical Adjustments Pro Forma
------------ ------------ ------------
Revenue
License fees $ 294,751 $(172,125) (1) $ 122,626
Consulting 387,723 387,723
Maintenance 33,061 33,061
Other 21,519 21,519
------------ ------------ ------------
Total revenue 737,054 (172,125) 564,929
Expenses
Payroll 839,550 (17,680)(2) 821,870
Payroll taxes 59,227 59,227
Employee health insurance 40,100 40,100
Software development and consulting 377,551 377,551
Administration 191,064 191,064
Interest 19,914 19,914
Travel 110,029 110,029
Marketing 4,388 4,388
Miscellaneous 1,066 1,066
Equipment and office rent 46,734 46,734
Depreciation 14,470 14,470
------------ ------------ ------------
Total expenses 1,704,093 (17,680) 1,686,413
------------ ------------ ------------
Net loss $ (967,039) $ (154,445) $ (1,121,484)
============ ============ ============
Net loss per share -
Basic $ (0.07) $ (0.01) $ (0.08)
============ ============ ============
Diluted $ (0.07) $ (0.01) $ (0.08)
============ ============ ============
Weighted average shares outstanding -
Basic 14,536,175 14,536,175 14,536,175
============ ============ ============
Fully Diluted 14,536,175 14,536,175 14,536,175
============ ============ ============
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Notes to Unaudited Pro Forma Statement of Operations
for the twelve months ended September 30, 2000
The following notes to the pro forma adjustments for the unaudited Statement of
Operations for the twelve months ended September 30, 2000 set forth the
adjustments necessary to reflect the disposition and license of IFE assets as if
this had occurred on October 1, 1999.
(1) Reduce the IFE revenue due to the disposal and license of IFE assets.
(2) Eliminate commissions attributable to the IFE assets.
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(c) Exhibits
2. Amended and Restated Asset Purchase Agreement dated November 26,
2001 by and among Registrant and ISES Canada Incorporated (a
wholly-owned subsidiary of Registrant), as Sellers and Inflight
Digital Entertainment as Buyer.
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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.
SNAP2 CORPORATION
Registrant
By /s/ Dean R. Grewell
-----------------------------------
Dean R. Grewell, III
President & Chief Executive Officer
Date: December 10, 2001
EX-2 Amended and Restated Asset Purchase Agreement
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