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): May 5, 2003
-------------------
STUDENT ADVANTAGE, INC.
-----------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-26074 04-3263743
- --------------------------------------------------------------------------------
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Incorporation) Identification No.)
280 Summer Street, Boston, MA 02210
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(617) 912-2000
-----------------------------
(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 5, 2003, OCM Direct, Inc ("OCM"), a wholly owned subsidiary
of Student Advantage, Inc. (the "Company"), and OCM's subsidiaries, Collegiate
Carpets, Inc. and CarePackages, Inc. (which subsidiaries are together referred
to as the "OCM Subsidiaries"), sold substantially all of their assets to Alloy
Acquisition Subsidiary, LLC, a subsidiary of Alloy, Inc., pursuant to an Asset
Purchase Agreement (the "Agreement"), dated as of May 2, 2003, by and among
Alloy, Inc. and Alloy Acquisition Subsidiary, LLC (together, "Alloy"), the
Company, OCM and the OCM Subsidiaries.
The aggregate proceeds paid by Alloy for the acquired assets was
$17.4 million in cash, including settlement of certain intercompany obligations
between OCM Direct and the Company, less estimated deal costs of approximately
$0.7 million. In addition, Alloy assumed substantially all of the liabilities of
OCM and the OCM Subsidiaries, including the obligations under OCM's revolving
loan agreement with Bank of America; provided, however, that OCM and the OCM
Subsidiaries will remain subject to certain terms of the loan agreement through
May 31, 2003 or such earlier date selected by Bank of America. If an event of
default occurs under the loan agreement during this period and Bank of America
is unable to obtain full payment of the outstanding balance from Alloy, Bank of
America may seek payment from OCM and the OCM Subsidiaries of the remaining
amount outstanding. The Company's guarantee of the loan was terminated as of May
1, 2003 and Alloy has secured the loan with a $2.5 million letter of credit.
The assets sold related to OCM's and the OCM Subsidiaries' direct
marketing business, including the business of selling care packages, diploma
frames, carpets, residence hall linens and related dorm accessories, and
included customer and vendor contracts, fixed assets, working capital,
intellectual property and goodwill of OCM and the OCM Subsidiaries. Certain
proceeds from the sale were used to repay $7.8 million of the Company's
indebtedness to Reservoir Capital Associates, L.P. and its affiliates and
$1.2 million of the Company's indebtedness to Scholer, Inc. The remaining
proceeds will be used to fund the working capital needs of the Company.
The terms of the Agreement were determined on the basis of
arms-length negotiations. Prior to the execution of the Agreement, neither the
Company, OCM or the OCM Subsidiaries, nor any director or officer thereof, nor
any associate of any director or officer thereof, had any material relationship
with Alloy, except that (i) the Company and Alloy are parties to a marketing
services agreement entered into in May 2002 in connection with the purchase by a
subsidiary of Alloy of certain of the Company's assets relating to its SA
Marketing Group brand and (ii) the Company and Alloy are parties to a
non-competition and confidentiality agreement entered into in November 2001 in
connection with the sale of the capital stock of the Company's wholly-owned
subsidiary, eStudentLoan, Inc. to Alloy under which the Company agreed not to
compete with Alloy in certain businesses related to student loans, financial aid
or scholarship databases.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statement of the Business Acquired.
Not applicable.
(b) Pro Forma Financial Information
Introduction
Unaudited Condensed Balance Sheet as of March 31, 2003
Unaudited Condensed Pro Forma Statement of Operations for Year
ended December 31, 2002 and for the Three Months Ended March 31,
2003.
Notes to Unaudited Financial Statements
c) Exhibits
See the Exhibit Index attached hereto.
STUDENT ADVANTAGE, INC.
PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited condensed pro forma financial statements as of the
three months ended March 31, 2003 and the year ended December 31, 2002 have been
prepared to effect for the sale of OCM Direct. The condensed pro forma
statements reflect the disposition as of December 31, 2002 for balance sheet
purposes and as if the disposition had occurred on January 1, 2002 for income
statement purposes.
The pro forma financial statements have been prepared by Management and are
based upon the historical financial statements of the Company. Pro forma
adjustments are described in the accompanying notes. The pro forma statements of
operations may not be indicative of the results of operations that actually
would have occurred if the transaction had been in effect as of the beginning of
the respective periods nor do they purport to indicate the results of future
operations of the Company. The financial statement effects of the transaction
will be reflected in the historical financial statements of the Company as a
discontinued operation in accordance with SFAS 144.
The pro-forma financial statements should be read in conjunction with the
audited consolidated financial statement of Student Advantage, Inc. included
with its Annual Report on Form 10-K/A for the year ended December 31, 2002,
filed with the SEC on April 30, 2003 and its Quarterly Report on Form 10-Q for
the three months ended March 31, 2003 filed with the SEC on May 15, 2003.
STUDENT ADVANTAGE, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
MARCH 31, 2003
AS REPORTED
MARCH 31, PRO FORMA PRO FORMA
2003 ADJUSTMENTS COMBINED
----------- ----------- ---------
ASSETS
Current assets
Cash ............................................................. $ 2,248 $ 6,270 a $ 8,518
Accounts receivable .............................................. 2,297 (216) a 2,081
Inventory (finished goods) ....................................... 2,472 (2,472) a -
Prepaid expenses and other current assets ........................ 2,042 (473) a 1,569
--------- --------- ---------
Total current assets .......................................... 9,059 3,109 12,168
Notes receivable ................................................. 4,128 - 4,128
Property and equipment, net ...................................... 4,063 (900) a 3,163
Goodwill ......................................................... 16,843 (16,843) a -
Intangible and other assets, net ................................. 1,218 (1,033) a 185
--------- --------- ---------
Total assets .................................................. $ 35,311 $ (15,667) $ 19,644
========= ========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Notes payable .................................................... $ 13,000 $ (7,750) a $ 5,250
Related party note payable ....................................... 3,500 (1,250) a 2,250
Borrowings under revolving line of credit ........................ 3,640 (3,640) a -
Accounts payable ................................................. 3,207 (280) a 2,927
Accrued expenses ................................................. 7,241 (2,494) a 4,747
Deferred revenue and other advances .............................. 6,650 - 6,650
Current obligation under capital lease ........................... 80 (74) a 6
--------- --------- ---------
Total current liabilities ..................................... 37,318 (15,488) 21,830
--------- --------- ---------
Deferred gain .................................................... 534 - 534
Other long-term accrued expenses ................................. 136 - 136
Long-term obligation under capital lease ......................... 97 (97) a -
--------- --------- ---------
Total long-term obligations ................................... 767 (97) 670
--------- --------- ---------
Total liabilities ............................................. 38,085 (15,585) 22,500
--------- --------- ---------
Stockholders' deficit
Preferred stock($0.01 par value, 5,000,000 shares authorized,
no shares issued and outstanding),
Common stock($0.01 par value; authorized: 150,000,000 shares;
5,362,607 issued and outstanding), -
additional paid in capital and note receivable from stockholder 123,963 - 123,963
Accumulated deficit .............................................. (126,737) (82) a (126,819)
--------- --------- ---------
Total stockholders' deficit ................................... (2,774) (82) (2,856)
--------- --------- ---------
Total liabilities and stockholders' deficit ................... $ 35,311 $ (15,667) $ 19,644
========= ========= =========
The following table sets forth selected historical financial information for
Student Advantage as previously reported and pro forma excluding the results of
operations of OCM Direct for the three months ended March 31, 2003.
STUDENT ADVANTAGE, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2003 - (UNAUDITED)
AS REPORTED
MARCH 31, PRO FORMA PRO FORMA
2003 ADJUSTMENTS COMBINED
----------- ----------- ---------
Revenues .............................. $ 5,796 $ (1,166) b 4,630
Costs and expenses
Cost of revenues .................. 2,145 (612) b 1,533
Product development ............... 1,703 (111) b 1,592
Sales and marketing ............... 4,092 (2,490) b 1,602
General and administrative ........ 2,079 (878) b 1,201
Depreciation and amortization ..... 2,027 (307) c 1,720
Interest and other (income) expense 11 (25) d (14)
-------- ----------- --------
Total costs and expenses .... 12,057 (4,423) 7,684
-------- ----------- --------
Operating loss ........................ (6,261) 3,257 (3,004)
Non-operating income
Realized gain on sale of assets ....... 4,338 - 4,338
-------- ----------- --------
Net Income (Loss) ..................... $ (1,923) $ 3,257 $ 1,334
======== =========== ========
Basic and diluted net income (loss)
per share ............................ $(0.36) e $0.25 e
====== =====
Shares used in computing basic and
diluted net income (loss) per share .. 5,363 e 5,363 e
===== =====
The following table sets forth selected historical financial information for
Student Advantage as previously reported and pro forma excluding the results of
operations of OCM Direct for the year ended December 31, 2002.
STUDENT ADVANTAGE, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002 - (UNAUDITED)
AS REPORTED
DECEMBER 31, PRO FORMA PRO FORMA
2002 ADJUSTMENTS COMBINED
------------ ------------ ------------
Revenues ............................................... $ 57,278 $ (28,483) b $ 28,795
Costs and expenses
Cost of revenues ................................... 22,972 (11,250) b 11,722
Product development ................................ 7,746 (331) b 7,415
Sales and marketing ................................ 27,158 (11,576) b 15,582
General and administrative ......................... 11,826 (3,524) b 8,302
Depreciation and amortization ...................... 9,005 (1,238) c 7,767
Interest and other (income) expense ................ 3,940 (53) d 3,887
Impairment of long-lived assets .................... 242 - 242
----------- --------- ------------
Total costs and expenses ..................... 82,889 (27,972) 54,917
----------- --------- ------------
Operating loss. ........................................ (25,611) (511) (26,122)
Non-operating income
Realized gain on restructured debt ..................... 2,937 - 2,937
Realized gain on sale of assets ........................ 6,805 - 6,805
----------- --------- ------------
Loss before income taxes ............................... (15,869) (511) (16,380)
Provision for income tax ........................... (61) 0 (61)
----------- --------- ------------
Net Loss ............................................... $ (15,930) $ (511) $ (16,441)
=========== ========= ============
Basic and diluted net loss per share ................... $(3.10) $(3.20)
====== ======
Shares used in computing basic and diluted net loss
per share ............................................. 5,145 5,145
===== =====
STUDENT ADVANTAGE, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The pro forma financial statements show the adjustment for the sale of
OCM Direct as if such disposition had occurred on December 31, 2002 for
balance sheet purposes and January 1, 2002 for income statement
purposes.
(a) To reflect the sale of the OCM Direct assets and the reduction of
the Company's secured debt by the proceeds received at closing from
the transaction.
(b) To eliminate revenues and operating expenses for OCM Direct.
(c) To eliminate depreciation and amortization for OCM Direct.
(d) To eliminate interest expense for the reduction of indebtedness due
to the sale of OCM Direct.
(e) Diluted net income (loss) per share does not differ from basic net
income (loss) per share since potential common shares from exercise
of stock options and warrants are anti-dilutive.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
STUDENT ADVANTAGE, INC.
(Registrant)
Date: May 20, 2003 By: /s/ Raymond V. Sozzi
-------------------------------------
Raymond V. Sozzi, Jr.,
President and Chief Executive Officer
EXHIBIT INDEX
2.1 Asset Purchase Agreement by and among Alloy, Inc., Alloy Acquisition
Subsidiary, LLC, OCM Direct, Inc., Collegiate Carpets, Inc.,
CarePackages, Inc. and Student Advantage, Inc. dated as of May 2, 2003.
10.1 Third Amendment to Revolving Line of Credit Loan Agreement and Security
Agreement effective as of May 1, 2003 by and among OCM Direct, Inc.,
Care Packages, Inc., Collegiate Carpets, Inc., Alloy, Inc., Alloy
Acquisition Subsidiary, LLC and Bank of America, N.A. (incorporated
herein by reference to the Company's Quarterly Report on Form 10-Q for
the period ending March 31, 2003).