SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 18, 1997
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MICROLEAGUE MULTIMEDIA, INC.
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(Exact name of registrant as specified in charter)
Pennsylvania 1-11743 23-2563090
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(State or other Juris- (Commission File Number) (IRS Employer Identi-
diction of incorporation) fication No.)
100 Millersville Road, Lancaster, Pennsylvania 17604
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(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code (717) 872-6567
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N/A
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(Former name or former address, if changed since last report.)
No Exhibit Index appears herein.
Items 7(a) and (b) of MicroLeague Multimedia, Inc.'s (the "Registrant")
Current Report on Form 8-K, dated February 18, 1997 (the "Report") are hereby
amended and restated in their entirety as follows:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
RABBIT EARS PRODUCTIONS, INC. FINANCIAL STATEMENTS
Report of Independent Accountant......................................................... 3
Rabbit Ears Productions, Inc. Balance Sheets, December 31, 1996 and
December 31, 1995.................................................................. 4
Rabbit Ears Productions, Inc. Statements of Operations for the years
ended December 31, 1996 and December 31, 1995...................................... 5
Rabbit Ears Productions, Inc. Statements of Cash Flow for the years
ended December 31, 1996 and December 31, 1995...................................... 6
Notes to Rabbit Ears Productions, Inc. Financial Statements.............................. 7
PRO FORMA FINANCIAL STATEMENTS................................................................. 9
Pro Forma Balance Sheet, December 31, 1996............................................... 10
Pro Forma Income Statement for the year ended December 31, 1996.......................... 11
Pro Forma Income Statement for the year ended December 31, 1995.......................... 12
Notes to Unaudited Consolidated Pro Forma Financial Information.......................... 13
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Report of Independent Accountant
To the Shareholders of
Rabbit Ears Productions, Inc.
I have audited the accompanying balance sheets of Rabbit Ears Productions, Inc.
for the years ended December 31, 1996 and 1995, and the related statements of
operations and cash flows. These financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position, operations and cash flows of Rabbit
Ears Productions, Inc. for the years ended December 31, 1996 and 1995, in
conformity with generally accepted accounting principles.
JOSEPH S. GERBINO, CPA
Union, NJ 07083
April 29, 1997
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RABBIT EARS PRODUCTIONS, INC.
BALANCE SHEETS
December 31, 1996 December 31, 1995
----------------- -----------------
ASSETS:
CURRENT ASSETS
Cash and Cash Equivalents .................... 56,306 --
Accounts Receivable .......................... 141,973 338,978
Inventory .................................... 99,247 524,656
Prepaid and Other Current Assets ............. -- 14,500
----------- -----------
Total Current Assets ............................ 297,526 878,134
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment ................ 117,206 117,206
Less: Accumulated Depreciation .............. (117,206) (105,692)
----------- -----------
Net Property, Plant and Equipment ............... 0 11,514
----------- -----------
OTHER ASSETS
Fixed Assets ................................. -- --
Less: Accumulated Amortization .............. -- --
----------- -----------
Total Other Assets .............................. 0 0
----------- -----------
TOTAL ASSETS .................................... 297,526 889,648
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ............................. 1,047,007 999,788
Notes Payable ................................ 1,090,000 1,090,000
Current Portion of Long-Term Debt ............ -- --
Accrued Expenses and Other Current Liabilities 143,689 595,738
----------- -----------
Total Current Liabilities ....................... 2,280,696 2,685,526
LONG-TERM LIABILITIES
Long-Term Debt ............................... 842,314 206,850
----------- -----------
Total Long-Term Liabilities ..................... 842,314 206,850
----------- -----------
TOTAL LIABILITIES ............................... 3,123,010 2,892,376
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock ................................. 1,942 1,942
Treasury Stock ............................... (71,162) (71,162)
Additional Paid In Capital ................... 8,088,347 8,561,075
Accumulated Deficiency ....................... (10,844,611) (10,494,583)
----------- -----------
Total Stockholders' Equity ...................... (2,825,484) (2,002,728)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ......................... 297,526 889,648
=========== ===========
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RABBIT EARS PRODUCTIONS, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
1996 1995
---------- ----------
Net Sales ................... 1,968,088 2,277,242
Cost of Sales ............... 911,610 505,517
---------- ----------
Gross Profit ................ 1,056,478 1,771,725
Operating Expenses
Depreciation Expense ..... 11,514 11,108
General & Administrative . 1,247,891 3,239,551
---------- ----------
Total Operating Expenses .... 1,259,405 3,250,659
---------- ----------
Loss from Operations (202,927) (1,478,934)
Interest Expense ......... 147,101 65,914
Other Income ............. -- (1,920)
---------- ----------
Net Loss .................... (350,028) (1,542,928)
========== ==========
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RABBIT EARS PRODUCTIONS, INC.
STATEMENTS OF CASH FLOW
For the Years Ended December 31,
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ......... ............................. (350,028) (1,542,928)
Adjustments to Reconcile Net Loss to Net Cash
in Operating Activities:
Depreciation and Amortization .................. 11,514 11,108
Changes in Operating Assets and Liabilities:
Decrease in Accounts Receivable ................ 197,005 1,194,752
Decrease in Inventories ........................ 425,409 422,755
Decrease in Other Current Assets ............... 14,500 65,191
(Increase) Decrease in Accounts Payable ........ 47,219 (653,975)
(Increase) Decrease in other Accrued Liabilities (151,311) 7,500
Decrease in other Current Liabilities .......... (209,988) (10,012)
---------- ----------
Net Cash (Used in) Operating Activities ........... (15,680) (505,609)
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposition of Property, Plant and Equipment ... 0 1,920
---------- ----------
Net Cash (Used in) Investing Activities ........... 0 1,920
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on Long-Term Debt ................... 635,464 15,632
Net Proceeds from Sale of Common Stock ......... (472,728) 26,964
---------- ----------
Net Cash Provided by Investing Activities ......... 162,736 42,596
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ............................... 147,056 (461,093)
CASH AND CASH EQUIVALENTS, beginning of period .... (90,750) 370,343
---------- ----------
CASH AND CASH EQUIVALENTS, end of period .......... 56,306 (90,750)
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Period For:
Interest ..................................... 147,101 65,914
Income Taxes ................................. 250 250
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RABBIT EARS PRODUCTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
Note 1 - BASIS OF PRESENTATION
Rabbit Ears Productions, Inc. (the "Company") is primarily engaged in
the development and distribution of audio, video and books for
entertainment purposes sold throughout the United States.
The financial statements are presented to reflect the acquisition by
the Registrant as of February 18, 1997. Had the Company not been
acquired, there would raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
CASH AND CASH EQUIVALENTS
For the purposes of reporting cash flows, cash and cash equivalents
include cash on hand and cash in banks.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and is depreciated
using the straight-line method over the asset's estimated useful life.
Major additions to property, plant and equipment are capitalized at
cost. Expenditures for repairs and maintenance are charged to expense
as incurred.
REVENUE RECOGNITION
Revenues are recognized when a product is shipped or a service is
performed, and when no significant obligations remain and collection is
probable. Net revenues are comprised of the total sales billed during
the period less the sales value of goods estimated to be returned,
trade discounts and customer allowances anticipated at the time of
shipment.
RESEARCH AND DEVELOPMENT
Research and development costs are included in the accompanying
statements of operations as general and administrative expenses.
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SUBSEQUENT EVENTS:
The Company was acquired on February 18, 1997 by the Registrant as
discussed in Note 1. The terms of the purchase included the issuance of
268,097 shares of common stock in exchange for the outstanding assets
of the Company.
Note 3 - LEASE COMMITMENT
The Company leases office space under a non-cancelable operating lease
expiring January 31, 1999. As of December 31, 1996, the minimum
aggregate annual rental payments under the lease are as follows:
Year Ending
December 31,
1997 $ 74,800
1998 $ 81,033
1999 $ 6,800
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Total $ 162,633
=========
The lease provides for increases in real estate taxes and certain
operating expenses.
Total rent expense charged to operations for the years ended December
31, 1996 and 1995 was $72,788 and $83,353, respectively.
Note 4 - TAX BENEFIT OF NET OPERATING LOSS
An income tax benefit of approximately $1,580,842 was not recorded by
the Company for the year ended December 31, 1996. The benefit was not
recorded because there is no possibility of realizing future value from
the tax benefit due to the Company's assets being acquired effective
February 18, 1997 as discussed in Note 1.
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(b) PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Consolidated Balance Sheet (unaudited) at December 31,
and Pro Forma Consolidated Statement of Operations (unaudited) for the year
months ended December 31, 1996 give pro forma effect to (i) the Registrant's
acquisition of Micro Sports, Inc. ("Micro Sports") on October 24, 1996 and (ii)
the Registrant's acquisition of Rabbit Ears Productions, Inc. ("Rabbit Ears")
described more fully under Item 2 of the Report, as if such transactions
occurred as of December 31, 1996 for the Pro Forma Consolidated Balance Sheet
and as of January 1, 1996 for the Pro Forma Consolidated Statement of
Operations. Each of such acquisitions was treated as a "purchase" for accounting
purposes.
The Pro Forma Consolidated Balance Sheet is based on (i) the Registrant's
historical condensed consolidated balance sheet as of December 31, 1996 (which
reflects the acquisition of Micro Sports on October 24, 1996), and (ii) Rabbit
Ears' audited condensed balance sheet as of December 31, 1996.
The Pro Forma Consolidated Statement of Operations for the year ended December
31, 1996 is based on (i) the Registrant's historical condensed consolidated
statement of operations for the fiscal year ended December 31, 1996 (which
reflects data for Micro Sports for the period beginning October 24, 1996 and
(ii) Rabbit Ears' audited condensed statement of operations for the year ended
December 31, 1996.
The Pro Forma Consolidated Statement of Operations for the year ended December
31, 1995 is based on (i) the Registrant's historical, condensed consolidated
statement of operations for the fiscal year ended December 31, 1995, (ii)
Ablesoft's statement of operations for the nine months ended September 30, 1995,
(iii) Micro Sports statement of operations for the year ended December 31, 1995,
and Rabbit Ears' audited condensed statement of operations for the year ended
December 31, 1995.
The pro forma information does not purport to be indicative of the combined
results of operations or financial position that would have been reported had
these transactions taken place as of December 31, 1996 with respect to the Pro
Forma Consolidated Balance Sheet or as of January 1, 1996 with respect to the
Pro Forma Consolidated Statement of Operations, as the case may be, or future
results of operations or financial position of the Registrant. The Pro Forma
Consolidated Financial Statements should be read in conjunction with the
Registrant's historical financial statements and related notes thereto for the
year ended December 31, 1996 included in its Annual Report on Form 10-KSB and
the historical financial statements and notes thereto of Rabbit Ears for the
years ended December 31, 1996 and 1995 included in the Report under Item 7(a).
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PRO FORMA CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1996
Historical
-----------------------------
Pro Forma
Adjustments
MicroLeague* Rabbit Ears for Rabbit Ears(1) Pro Forma
------------ ----------- ---------------- ---------
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents................ $ 22,080 $ 56,306 $ (56,306) $ 22,080
Accounts receivable, net of allowance
for returns and doubtful accounts...... 867,915 141,973 (141,973) 867,915
Inventory, net........................... 1,302,728 99,247 (49,247) 1,352,728
Prepaid and other current assets......... 268,939 -- -- 268,939
---------- ----------- ------------ -----------
Total current assets................. 2,461,662 297,526 (247,926) 2,511,662
Fixed assets, net.......................... 858,290 -- 858,290
Goodwill, net.............................. 1,592,301 -- 2,336,900 3,929,201
Intangible assets, net..................... 2,307,710 -- 2,307,710
Other assets............................... 130,380 130,380
---------- ----------- ------------ -----------
Total assets......................... $7,350,343 $ 297,526 $ 2,089,374 $9,737,243
=========== ============ ============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable............................ $1,800,200 $ 1,090,000 $(1,090,000) $1,800,200
Current portion of long-term debt and
capital leases......................... 338,626 338,626
Accounts payable......................... 1,488,647 1,047,007 (1,047,007) 1,488,647
Accrued expenses......................... 796,300 143,689 131,311 1,071,300
---------- ----------- ------------ -----------
Total current liabilities............ 4,423,773 2,280,696 (2,005,696) 4,698,773
Deferred tax liability..................... 83,300 -- -- 83,300
Long-term debt and capital leases, net..... 673,085 842,314 (842,314) 673,085
---------- ----------- ------------ -----------
Total liabilities.................... 5,180,158 3,123,010 (2,848,010) 5,455,158
Stockholders' equity (deficiency).......... 2,170,185 (2,825,484) 4,937,384 4,282,085
---------- ----------- ------------ -----------
Total liabilities and stockholders' equity. $7,350,343 $ 297,526 $ 2,089,374 $9,737,243
=========== ============ ============ ==========
* Micro Sports balances are included in MicroLeague balances at December 31,
1996.
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MICROLEAGUE MULTIMEDIA, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR YEAR ENDED DECEMBER 31, 1996
Pro Forma Pro Forma
MicroLeague Adjustments Adjustments
Consolidated Micro Sports Rabbit Ears for Micro Sports for Rabbit Ears Pro Forma
------------ ------------ ----------- ---------------- --------------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Revenues....................... $ 4,087,037 $ 91,494 $ 1,968,088 $ 6,146,619
Cost of Goods sold................. 3,488,509 -- 911,610 4,400,119
------------ ----------- ----------- -----------
Gross profit....................... 598,528 91,494 1,056,478 1,746,500
Operating expenses:
Product Development .............. 1,487,523 -- -- 1,487,523
Selling and marketing ............ 1,771,645 -- -- 1,771,645
General and administrative ....... 2,307,556 987,586 1,259,405 223,125 116,845(6) 4,894,517
------------ ----------- ------------ --------- --------- -----------
Total operating expenses......... 5,566,724 987,586 1,259,405 223,125(5) 116,845 8,153,685
------------ ----------- ------------ --------- --------- -----------
Income (loss) from operations...... (4,968,196) (896,092) (202,927) (223,125) (116,845) (6,407,185)
Interest expenses.................. 257,815 3,768 147,101 408,684
Other expenses (income)............ -- 9,356 -- -- -- 9,356
------------ ----------- ------------ --------- --------- -----------
Income (loss) before provision for
income taxes ..................... (5,226,011) (909,216) (350,028) (223,125) (116,845) (6,825,225)
Benefit (provision) for income taxes
before extraordinary items ....... (16,300) -- -- 89,250(3) 46,738(3) 119,688
------------ ----------- ------------ --------- --------- -----------
Income (loss) before extraordinary items (5,242,311) (909,216) (350,028) (133,875) (70,107) (6,705,537)
Extraordinary loss on early extinguishment
of debt ......................... 340,303 -- -- -- -- 340,303
------------ ----------- ------------ --------- --------- -----------
Net income (loss) ............... (5,582,614) (909,216) (350,028) (133,875) (70,107) (7,045,840)
============ =========== ============ ========= ========= ==========
Per share of Common Stock:
Loss before extraordinary items... $ (1.46) $ (1.74)
Extraordinary items .............. (.10) (.09)
------------ -----------
Net loss ......................... $ (1.56) $ (1.83)
============ ===========
Weighted average common shares
outstanding ...................... 3,584,722 3,852,819
============ ===========
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MICROLEAGUE MULTIMEDIA, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR YEAR ENDED DECEMBER 31, 1995
Pro Forma Pro Forma
Microleague Micro Rabbit Adjustments Adjustments
Consolidated Ablesoft Sports Ears for Ablesoft for Micro Sport
------------ -------- ------ ---- ------------ ---------------
(Unaudited) (Unaudited)
Net Revenues................. $5,010,156 $ 547,206 $ 185,437 $ 2,277,242
Cost of Goods Sold........... 2,374,975 156,082 18,481 505,517
---------- ---------- ----------- -----------
Gross profit................. 2,635,181 391,124 166,956 1,771,725
---------- ---------- ----------- -----------
Operating Expenses:
Selling and Marketing ....... 515,882 160,208 -- --
General and Administrative .. 1,771,005 376,655 1,358,673 3,250,659 68,091(2) 297,500(5)
---------- ---------- ------------ ----------- -------- ---------
Total operating expenses .. 2,286,887 536,863 1,358,673 3,250,659 68,091 297,500
---------- ---------- ------------ ----------- -------- ---------
Income (loss) from operations 348,294 (145,739) (1,191,717) (1,478,934) (68,091) (297,500)
Interest expenses.. ......... 224,451 22,844 5,535 65,914 28,818(4) --
Other expenses (income) ..... 41,054 16,295 (75,021) -- -- --
---------- ---------- ------------ ----------- -------- ---------
Income (loss) before provision
for income taxes ........... 82,789 (184,878) (1,122,231) (1,544,848) (96,909) (297,500)
Benefit for income taxes .... 16,300 -- -- -- 38,763(3) 119,000(3)
---------- ---------- ------------ ----------- -------- ---------
Net income (loss).......... $ 99,089 $(184,878) $(1,122,231) $(1,544,848) (60,845) (178,500)
========== ========== ============ =========== ======== =========
Net income (loss) per common
share ...................... $ .03
==========
Weighted average common shares
outstanding .............. 2,937,978
==========
(RESTUB)
Pro Forma
Adjustments
for Rabbit Ears Pro Forma
--------------- ---------
(Unaudited) (Unaudited)
Net Revenues................. $8,020,041
Cost of Goods Sold........... 3,055,055
-----------
Gross profit................. 4,964,986
Operating Expenses:
Selling and Marketing ....... 676,090
General and Administrative .. 116,845(6) 7,239,428
------- -----------
Total operating expenses .. 116,845 7,915,518
------- -----------
Income (loss) from operations (116,845) (2,950,532)
Interest expenses.. ......... -- 347,562
Other expenses (income) ..... -- (17,672)
------- -----------
Income (loss) before provision
for income taxes ........... (116,845) (3,280,422)
Benefit for income taxes .... 46,738(3) 220,801
------- -----------
Net income (loss) ......... (70,107) (3,062,320)
======= ==========
Net income (loss) per common
share ..................... $ .87
==========
Weighted average common shares
outstanding .............. 3,514,957
==========
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Notes to Unaudited Consolidated Pro Forma Financial Information
Note 1 To record the excess of the purchase price for the net assets
acquired under the purchase method of accounting for the Rabbit Ears'
acquisition as well as eliminate assets and liabilities not assumed by
Registrant. The purchase price allocation for Rabbit Ears is based on
management's preliminary estimates of the fair value of the assets and
liabilities assumed. The final allocation may differ from these
estimates. In addition to the assumed liabilities, the consideration
for the acquisition consists of 268,097 shares of the Registrant's
common stock valued at $2,000,000.
Note 2 To record amortization expenses of $56,325 related to $751,000 of
goodwill resulting from the Ablesoft Acquisition, which is being
amortized over 10 years. Also reflects amortization of non-goodwill
intangible assets over the same respective lives.
Note 3 To record an estimated tax provision at an assumed rate of 40% on the
consolidated results from operations.
Note 4 To record interest expenses on debt incurred in connection with the
Ablesoft acquisition offset by a reduction of interest expenses on APBA
acquisition debt, which was converted to equity in 1996.
Note 5 To record amortization expenses of $282,500 related to goodwill and
licensing fees from the Micro Sports acquisition, which is being
amortized over 10 years. Also reflects depreciation of property, plant
and equipment over 10 years.
Note 6 To record amortization expense of $116,845 related to goodwill from
the Rabbit Ears' acquisition, which is being amortized over 20 years.
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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 hereunto duly authorized.
MICROLEAGUE MULTIMEDIA, INC.
(Registrant)
Date: May 1, 1997 By: /s/ PETER R. FLANAGAN
----------------------------
Name: Peter R. Flanagan
Title: Chief Financial Officer
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