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 (Date of earliest event reported) June 30, 1996
NTN COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-11460 31-1103425
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
5966 La Place Court, Carlsbad, California 92008
(Address of principal executive offices) (Zip code)
619-438-7400
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
The index to exhibits appears at page __ of the ______ pages constituting the
manually signed original of this report.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Sale of Assets of New World Computing, Inc.
-------------------------------------------
On June 30, 1996, NTN Communications, Inc. ("NTN") and its wholly owned
subsidiary, New World Computing, Inc. ("New World"), entered into a definitive
Agreement of Purchase and Sale of Assets (the "Sale Agreement") by which
substantially all of the assets and business of New World have been sold to The
3DO Company ("3DO"). The transaction was previously announced by NTN. New World,
which was acquired by NTN in 1993, is engaged in the development, distribution,
marketing and sale of computer games and other personal computer entertainment
software.
In consideration of the sale of assets, 3DO will issue to New World an
aggregate of 1,200,000 shares of the common stock of 3DO (the "3DO Shares") and
assume approximately $1,300,000 of liabilities of New World. 3DO also has agreed
to guarantee that the cash value realized by New World from the 3DO Shares will
not be less than $10 per share as described below. On July 12, 1996, the closing
sale price of the 3DO common stock as reported on the Nasdaq National Market was
$8.75 per share.
The actual number of 3DO Shares to be received by New World is subject to
downward adjustment under certain circumstances in the event the assets or
liabilities of New World acquired or assumed by 3DO differ from such assets and
liabilities as of March 31, 1996. Such adjustment is expected to be determined
on or before July 31, 1996 based upon a closing date balance sheet to be
furnished by New World and NTN. NTN currently expects that the actual number of
3DO Shares it will receive will be approximately 1,000,000. NTN and New World
have agreed to assign certain of the 3DO Shares to Jon Van Caneghem, the former
president of New World, as described below.
The Sale Agreement includes provisions entitling New World to have the 3DO
Shares it receives included in a registration statement to be filed by 3DO with
the Securities and Exchange Commission as soon as is practicable. 3DO has
agreed to use its best efforts to cause such registration statement to remain
effective for a period of at least 90 days. The registration period may be
extended by 3DO under certain circumstances as set forth in the Sale Agreement.
Under the provisions of the Sale Agreement, unless the parties agree
otherwise not more than 50,000 of the 3DO Shares (including the shares assigned
to Mr. Van Caneghem) may be resold during a single trading day. For its part,
3DO has agreed to guaranty the value of the 3DO Shares to New World as of the
end of such registration period. Accordingly, in the event that all of the 3DO
Shares are sold during such registration period, 3DO will pay to New World, in
cash, an amount equal to the difference, if any, between (i) the sum of $10 per
share plus sales discounts or commissions incurred by New World (not to exceed
3%) and (ii) the gross proceeds received by New World from sales of the 3DO
Shares. If less than all of the 3DO Shares have been sold as of the end of the
registration period, the guarantee payment will be calculated based on the
difference between the amount referred to in clause (i) above and the sum of the
gross proceeds received by New World from any sales of the 3DO Shares and the
then-current market value of the unsold 3DO Shares. New World will retain any
value in excess of $10 per share plus (applicable discounts or commissions not
to exceed 3%) realized by it from the sale of the 3DO Shares. In the event the
registration statement has not become effective by December 31, 1996, NTN and
New World will have certain rights to trigger payment of the guaranty. The terms
of 3DO's guaranty are set forth in detail in the Sale Agreement, a copy of which
is included as Exhibit 2.1 to this Report and incorporated herein by this
reference.
As part of the sale of New World's assets, NTN has agreed not to compete
with the former business of New World acquired by 3DO during the three-year
period ending June 30, 1999. NTN will not be restricted, however, from
developing, marketing or distributing its products and services on CD-ROM or
other media which also may be utilized by 3DO. A copy of the Noncompetition
Agreement is included as Exhibit E to the Sale Agreement and incorporated herein
by this reference.
2
In connection with the transaction with 3DO, NTN and New World agreed to
assign to Mr. Van Caneghem 135,000 of 3DO Shares (or such greater number as
equals 12 1/2% of the total 3DO Shares) received by New World in the transaction
in settlement of his existing employment agreement with New World and certain
other matters described therein. Mr. Van Caneghem will be employed by 3DO
following the sale of assets.
The terms of the foregoing transaction were determined by arm's-length
negotiations between NTN and 3DO, which prior to the transaction had no
affiliation or business with NTN or New World or any of their respective
officers, directors or associates. The sale will be taxable to New World and
NTN, and NTN estimates that the gain from the sale will be approximately
$3,300,000, net of applicable taxes. The actual gain and the taxes payable in
connection therewith cannot be determined until after the number of 3DO Shares
received, all costs have been calculated, and the final results of the
transactions have been reviewed against applicable tax regulations.
During the fiscal year ended December 31, 1995 and the quarter ended March
31, 1996, New World contributed approximately $5,400,000 and $1,250,000,
respectively, to NTN's consolidated revenues, and the sale of New World's assets
will result in lower total revenues for NTN for the current fiscal year. The
sale of New World's assets will enhance NTN's consolidated balance sheet and is
expected to improve its liquidity once the 3DO Shares are covered by an
effective registration statement and can be sold. There can be no assurance as
to when or at what price the 3DO Shares can be sold.
The matters discussed in this Report include forward-looking statements
that are subject to certain risks and uncertainties, including the final
determination of the number of 3DO Shares to be received in the transaction, the
final tax treatment of the transaction to NTN, the future market price and
realizable value of the 3DO Shares received in the transaction, the timing of
any future sales of such shares, and factors affecting 3DO's business which may
affect such market value and timing. As a result, no assurance can be made as
to the actual impact of the transaction on NTN's consolidated financial position
or results of operations for the year ending December 31, 1996.
Attached as Exhibit 2.1 to this Report is a copy of the Sale Agreement,
including exhibits thereto, which contain additional terms and provisions
relating to the subject matter of this Report, and which are incorporated by
reference in this Item 2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired:
Not applicable.
(b) Pro forma financial information:
The following unaudited pro forma balance sheet as of March 31, 1996,
assumes the sale of New World occurred on March 31, 1996. The
unaudited pro forma statements of operations for the three months
ended March 31, 1996, and for the year ended December 31, 1995,
assumes the sale of New World occurred on January 1, 1995.
The following unaudited pro forma financial statements do not purport
to be indicative of results of operations or financial position that
would have occurred had the disposition of New World been consummated
on January 1, 1995 or March 31, 1996, as the case may be, nor do they
purport to be indicative of actual or future results of operations or
financial condition. In addition, the following pro forma financial
statements are subject to a number of assumptions, limitations and
qualifications.
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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES
Pro Forma Consolidated Balance Sheet
March 31, 1996
March 31, March 31,
1996 Proforma 1996
Assets Historical Adjustments Pro Forma
------------------ ------------ ----------- -----------
Current assets:
Cash and cash equivalents $ 2,510,000 (86,000) 2,424,000
Investment in available-for-sale marketable securities 0 10,400,000 10,400,000
Interest-bearing security deposits 1,450,000 1,450,000
Accounts receivable - trade, net 5,427,000 (2,556,000) 2,871,000
Accounts receivable - other 875,000 875,000
Notes receivable - related parties 680,000 680,000
Software development costs, net 1,690,000 (1,690,000) 0
Inventories 6,933,000 (754,000) 6,179,000
Prepaid expenses and other current assets 2,772,000 (256,000) 2,516,000
------------ ---------- -----------
Total current assets 22,337,000 5,058,000 27,395,000
Fixed assets, net 2,240,000 (166,000) 2,074,000
Notes receivable - related parties 4,200,000 4,200,000
Interest-bearing security deposits 1,950,000 1,950,000
Software development costs, net 4,510,000 (1,083,000) 3,427,000
Other assets 3,862,000 3,862,000
------------ ---------- -----------
Total assets $ 39,099,000 3,809,000 42,908,000
============ ========== ===========
Liabilities and Shareholders' Equity
------------------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 2,398,000 2,289,000 4,687,000
Current portion of long-term debt 2,092,000 (732,000) 1,360,000
Deferred revenue 1,148,000 1,148,000
Customer deposits 1,236,000 1,236,000
------------ ---------- -----------
Total current liabilities 6,874,000 1,557,000 8,431,000
Deferred revenue 1,052,000 (18,000) 1,034,000
Long-term debt, excluding current portion 2,000 2,000
------------ ---------- -----------
Total liabilities 7,928,000 1,539,000 9,467,000
------------ ---------- -----------
Minority interest (208,000) (208,000)
Shareholders' equity
10% Cumulative convertible preferred stock 1,000 1,000
Common stock 113,000 113,000
Treasury stock (2,551,000) (2,551,000)
Additional paid-in capital 56,730,000 56,730,000
Accumulated deficit (22,914,000) 2,270,000 (20,644,000)
------------ ---------- -----------
Total shareholders' equity 31,379,000 2,270,000 33,649,000
------------ ---------- -----------
Total liabilities and shareholders' equity $ 39,099,000 3,809,000 42,908,000
============ ========== ===========
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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES
Assumptions to Proforma Consolidated Balance Sheet
March 31, 1996
1 Sale of New World assumed to have occurred on March 31, 1996; accordingly all
operations, assets and liabilities of New World have been removed.
2 Gross Proceeds (in the form of stock) is subject to adjustment based on a
closing balance sheet which cannot be determined at this point. The
transaction is expected to be finalized by July 31, 1996.
3 Proceeds from the sale before payment of resulting liabilities is estimated
to be $10,400,000.
4 Taxes on the sale are estimated to be $1,000,000 however the exact amount has
not been finalized and is subject to adjustment after determination of
proceeds, costs and applicable tax regulations.
5 Proceeds in the form of stock are included in Investment in available-for-
sale marketable securities and was assumed not to have been liquidated at the
balance sheet date.
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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1995
Year Ended Year Ended
December 31, December 31,
1995 Proforma 1995
Historical Adjustments Pro Forma
------------ ------------ -----------
Broadcast and production services $17,307,000 17,307,000
Product sales 3,884,000 (3,884,000) 0
Equipment sales 6,784,000 6,784,000
License fees and royalties 2,167,000 (1,495,000) 672,000
Other revenue 1,629,000 1,629,000
----------- ----------- -----------
Total revenues 31,771,000 (5,379,000) 26,392,000
Cost of services - broadcast and
production services 8,756,000 8,756,000
Cost of sales - product sales 1,844,000 (1,864,000) (20,000)
Cost of sales - equipment 4,981,000 4,981,000
----------- ----------- -----------
Total cost of sales 15,581,000 (1,864,000) 13,717,000
----------- ----------- -----------
Gross profit 16,190,000 (3,515,000) 12,675,000
----------- ----------- -----------
Operating expenses:
Selling, general and administrative 16,838,000 (3,257,000) 13,581,000
Legal and professional services 1,851,000 (131,000) 1,720,000
Research and development 1,471,000 1,471,000
----------- ----------- -----------
Total operating expenses 20,160,000 (3.388,000) 16,772,000
Operating income (loss) (3,970,000) (127,000) (4,097,000)
Interest income (expense), net 22,000 58,000 80,000
----------- ----------- -----------
Earnings (loss) from continuing
operations before income taxes (3,948,000) (69,000) (4,017,000)
Income taxes 0 0 0
----------- ----------- -----------
Earnings (loss) from continuing
operations (3,948,000) (69,000) (4,017,000)
----------- ----------- -----------
Gain on disposal of New World, net of
applicable taxes of $1,000,000 3,300,000 3,300,000
----------- ----------- -----------
Net earnings (loss) (3,948,000) 3,231,000 (717,000)
=========== =========== ===========
Net earnings (loss) per share $ (0.19) 0.15 (0.04)
=========== =========== ===========
Weighted average equivalent number of shares 20,301,000 20,301,000 20,301,000
=========== =========== ===========
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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Three Months Ended March 31, 1996
Three Months Three Months
Ended Ended
March 31, March 31,
1996 Proforma 1996
Historical Adjustments Pro Forma
--------------- -------------- ---------------
Broadcast and production services $ 5,339,000 5,339,000
Product sales 1,212,000 (1,212,000) 0
Equipment sales 1,310,000 1,310,000
License fees and royalties 29,000 (29,000) 0
Other revenue 385,000 (3,000) 382,000
----------- ---------- ----------
Total revenues 8,275,000 (1,244,000) 7,031,000
Cost of services - broadcast and
production services 2,508,000 2,508,000
Cost of sales - product sales 410,000 (410,000) 0
Cost of sales - equipment 822,000 822,000
----------- ---------- ----------
Total cost of sales 3,740,000 (410,000) 3,330,000
----------- ---------- ----------
Gross profit 4,535,000 (834,000) 3,701,000
----------- ---------- ----------
Operating expenses:
Selling, general and administrative 3,852,000 (644,000) 3,208,000
Legal and professional services 190,000 (26,000) 164,000
Research and development 498,000 (124,000) 374,000
----------- ---------- ----------
Total operating expenses 4,540,000 (794,000) 3,746,000
Operating income (loss) (5,000) (40,000) (45,000)
Interest income (expense), net 70,000 11,000 81,000
----------- ---------- ----------
Earnings (loss) before minority
interest and income taxes 65,000 (29,000) 36,000
Minority interest 208,000 0 208,000
----------- ---------- ----------
Earnings before income taxes 273,000 (29,000) 244,000
Income taxes 0 0 0
----------- ---------- ----------
Net earnings (loss) $ 273,000 (29,000) 244,000
=========== ========== ==========
Net earnings (loss) per share $ 0.01 0.00 0.01
=========== ========== ==========
Weighted average equivalent number of shares 23,678,000 23,678,000 23,678,000
=========== ========== ==========
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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES
Assumptions to Pro Forma Consolidated Statements of Operations
Assumptions to Pro Forma Statement of Operations for the Year Ended December 31,
- --------------------------------------------------------------------------------
1995
- ----
1. Sale of New World assumed to have occurred on January 1, 1995; therefore all
1995 operations of New World have been removed.
2. Gross proceeds (in the form of stock) is subject to adjustment based on a
closing balance sheet which cannot be determined at this point.
3. Proceeds from the sale before payment of resulting liabilities is estimated
to be $10,400,000.
4. Taxes on the sale are estimated to be $1,000,000 however the exact amount has
not been finalized and is subject to adjustment after determination of
proceeds, costs and applicable tax regulations.
5. Proceeds in the form of stock are included in the balance sheet and was
assumed not to have been liquidated for purposes of this statement.
Assumption to Pro Forma Statement of Operations for the Three Months Ended March
- --------------------------------------------------------------------------------
31, 1996
- --------
1. Sale of New World assumed to have occurred on January 1, 1995; therefore all
1995 operations of New World have been removed.
2. Proceeds in the form of stock are included in the balance sheet and was
assumed not to have been liquidated for purposes of this statement.
(c) Exhibits:
The following exhibit included with this Report is made part hereof:
Sequential Page No.
-------------------
2.1 Agreement of Purchase and Sale of Assets, dated as of June 30, 1996,
with schedules and exhibits, among NTN Communications, Inc., New World
Computing, Inc., and The 3DO Company.
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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, thereunto duly authorized.
NTN COMMUNICATIONS, INC.
Date: July 15, 1996 By: /s/ Ronald E. Hogan
----------------------------------------
Ronald E. Hogan, Chief Financial Officer
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