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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 31, 2000
LAUNCH MEDIA, INC.
(Exact name of registrant as specified in its charter)
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Delaware 000-25273 95-4463753
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
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2700 Pennsylvania Avenue
Santa Monica, California 90404
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (310) 526-4300
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 31, 2000, Launch Media, Inc. ("Launch") completed an
acquisition pursuant to which C.C.R.L., LLC, a California limited liability
company ("C.C.R.L."), became a wholly owned subsidiary of Launch. C.C.R.L. owns
and operates The Warped Tour, a summer concert series featuring rock
performances and extreme athletics demonstrations. Launch made certain cash
payments and issued approximately 788,474 shares of its Common Stock in exchange
for all outstanding membership interests of C.C.R.L., based upon the negotiated
value of C.C.R.L., as adjusted by specified liabilities of C.C.R.L., and upon an
average Launch closing stock price of $6.98 over a trading period defined in the
agreement governing the acquisition. The terms of the acquisition also include
contingent future payments to the sellers based on performance targets set for
the operations of The Warped Tour. Launch intends to continue the operations of
The Warped Tour as a part of Launch. A copy of the press release announcing the
completion of the acquisition is attached as Exhibit 99 and is incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Item 7 to the Registrant's Current Report on Form 8-K filed on
September 14, 2000 is amended to read in its entirety as follows:
(a) Financial statements of C.C.R.L., LLC
(b) Pro forma financial information.
(c) Exhibits.
Exhibit No. Description
- ----------- -----------
23 Consent of PricewaterhouseCoopers LLP
2 Membership Interest Purchase Agreement dated as of June 12,
2000 by and among Launch, C.C.R.L., Creative Artists Agency,
LLC, Codikow & Carroll, P.C., 4 Fini, Inc. and Vans, Inc.
(incorporated by reference from Launch's Form 8-K filed on
September 14, 2000 with the Securities and Exchange
Commission).
99 Press release dated September 7, 2000 announcing the
completion of the acquisition (incorporated by reference
from Launch's Form 8-K filed on September 14, 2000 with the
Securities and Exchange Commission).
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Item 7(a) Financial Statements of C.C.R.L., LLC:
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
C.C.R.L., LLC
In our opinion, the accompanying balance sheet and the related statements
of operations and membership interests and cash flows present fairly, in all
material respects, the financial position of C.C.R.L., LLC (the "Company") at
December 31, 1999, and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with auditing standards generally accepted in
the United States which require that we 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Woodland Hills, California
October 20, 2000
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C.C.R.L., LLC
BALANCE SHEET
DECEMBER 31, 1999
(in thousands)
ASSETS:
Current assets:
Cash $132
Accounts receivable, net 132
Prepaid and other current assets 11
----
Total assets $275
====
LIABILITIES AND MEMBERSHIP INTERESTS:
Current liabilities:
Accounts payable $109
----
Total current liabilities 109
Membership interests 166
----
Total liabilities and membership interests $275
====
The accompanying notes are an integral part of these financial statements.
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C.C.R.L., LLC
STATEMENT OF OPERATIONS AND MEMBERSHIP INTERESTS
(in thousands)
For The Year
Ended For The Nine Months
December 31, Ended September 30,
----------------------
1999 1999 2000
---- ---- ----
(unaudited)
Net revenues
Advertising and sponsorships $2,751 $2,222 $2,079
Tour tickets and other 4,045 3,531 4,913
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Total revenues 6,796 5,753 6,992
Operating expenses
Cost of tour operations 4,933 4,622 5,321
Sales and marketing 305 260 816
General and administrative 346 283 233
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Income from operations 1,212 588 622
Interest income 5 2 1
-------------------------------------------
Income before provision for income taxes 1,217 590 623
Provision for income taxes 46 - 12
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Net income 1,171 590 611
Membership interests, beginning of the year 145 145 166
Distributions to Members (1,150) (205) (105)
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Membership interests, end of the period $166 $530 $672
===========================================
The accompanying notes are an integral part of these financial statements.
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C.C.R.L., LLC
STATEMENT OF CASH FLOWS
(in thousands)
For The Year
Ended For The Nine Months
December 31, Ended September 30,
-------------------
1999 1999 2000
---- ---- ----
(unaudited)
Cash flows from operating activities
Net income $ 1,171 $ 590 $ 611
Adjustments to reconcile net income to
net cash provided by operating activities:
Allowance for bad debts - - 100
Changes in operating assets and liabilities:
Accounts receivable (91) 228 (250)
Due from Launch Media, Inc. - - (340)
Other assets 112 - (24)
Accounts payable 37 (23) (93)
Deferred revenue (150) - -
----------------------------------------
Net cash provided by operating activities 1,079 795 4
----------------------------------------
Cash flows from financing activities
Distributions to Members (1,150) (205) (105)
----------------------------------------
Net cash used by financing activities (1,150) (205) (105)
----------------------------------------
(Decrease) increase in cash (71) 590 (101)
Cash beginning of the year 203 203 132
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Cash at the end of the period $ 132 $ 793 $ 31
========================================
Supplementary disclosure of cash flow information: Cash paid during the period
for:
Income taxes $46 $ - $12
Interest $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
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C.C.R.L., LLC
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND ACQUISITION:
C.C.R.L., LLC ("the Company") is a California limited liability corporation
and owns and operates The Warped Tour, a summer concert series featuring rock
performances and extreme athletics demonstrations. On August 31, 2000, Launch
Media, Inc. ("Launch") completed the acquisition of the Company, which became a
wholly-owned subsidiary of Launch. In connection with the transaction, Launch
issued 788,474 shares of its common stock with an estimated fair value of $5.5
million and cash payments of $2.0 million in exchange for all of the outstanding
membership interests of the Company. In addition, the terms of the acquisition
also included contingent future purchase payments to the sellers in either stock
or cash, aggregating an amount not to exceed $23.5 million, based on annual and
cumulative performance targets set for the operations of the Company over the
next five years.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited interim financial statements of the Company for the nine
months ended September 30, 1999 and 2000, included herein have been prepared in
accordance with the instructions for Form 10-Q under the Securities Exchange Act
of 1934, as amended, and Article 10 of Regulation S-X under the Securities Act
of 1933, as amended. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations relating to interim financial statements.
In the opinion of management, the accompanying unaudited interim
financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the results of the Company's
operations and its cash flows for the nine months ended September 30, 1999 and
2000. The results for the nine months ended September 30, 2000 are not
necessarily indicative of the expected results for the full fiscal year or any
future period.
USE OF 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
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company's revenues have been derived primarily from the sale of
advertising and sponsorships and ticket and other sales. Revenues for
advertising and sponsorships during the Warped Tour are recognized ratably over
the sponsorship term based on the number of shows. The Warped Tour typically
runs from late June through early September of each year. Ticket and other sales
are recognized upon completion of each tour date.
Advance payments for advertising and sponsorships are deferred and
recognized over the term of the related sponsorship.
CASH
The Company considers all highly liquid investments with an initial
maturity of three months or less to be cash. The Company maintains its cash
accounts in various financial institutions and, at times, these deposits may be
in excess of the federally insured limit.
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C.C.R.L., LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash, accounts receivable
and accounts payable are carried at cost, which approximates fair market value
because of the short-term maturity of these instruments.
WEB SITE
Costs incurred by the Company to enhance, manage, monitor and operate the
Company's Web site are expensed as incurred.
ADVERTISING
Advertising costs are expensed as incurred.
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
The Company sells sponsorships and advertising to major advertising
agencies representing their clients and directly to large, well established,
companies.
The Company's customers are concentrated in the United States. The Company
performs ongoing credit evaluations of its customers' financial condition and
generally does not require collateral. Estimated credit losses have been
provided for in the financial statements and, to date, have generally been
within management's expectations.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax basis of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
3. RELATED PARTY TRANSACTIONS:
Payments to Members for services performed during the year ended December 31,
1999 were $450,000.
4. INCOME TAXES:
The provision for income taxes for 1999 represents primarily payments to
foreign tax jurisdictions for tour shows which were performed in foreign
countries during the year ended December 31, 1999. Other federal and state
income tax liabilities are the responsibility of the individual members of the
Company and, accordingly, are not reflected in the Company's financial
statements.
5. CONTINGENCIES
In the normal course of business, the Company, from time to time, is a
defendant in certain litigation, claims and inquiries. While it is not feasible
to predict the outcomes of these matters, the Company is not presently aware of
nor expects that any sum it may be required to pay in connection with these
matters would have a material effect on its financial position or results of
operations.
6. CAPITALIZATION AND SUBSEQUENT EVENT:
The Company had four members, which owned the Company's membership
interests. On August 31, 2000, Launch Media, Inc. ("Launch") completed the
acquisition of the Company, which became a wholly-owned subsidiary of Launch. In
connection with the transaction, Launch issued 788,474 shares of its common
stock with an estimated fair value of $5.5 million and cash payments of $2.0
million in exchange for all of the outstanding membership interests of the
Company. In addition, the terms of the acquisition also included contingent
future purchase payments to the members in either stock or cash, aggregating an
amount not to exceed $23.5 million, based on annual and cumulative performance
targets set for the operations of the Company over the next five years.
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Item 7(b) Pro Forma Financial Information
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION - OVERVIEW
Acquisition of The Warped Tour
On August 31, 2000, Launch Media, Inc. ("Launch") acquired C.C.R.L.,
LLC, a California limited liability company ("the Company" or "The Warped
Tour"), which became a wholly owned subsidiary of Launch. The Warped Tour is a
summer concert series featuring rock performances and extreme athletics
demonstrations. The acquisition has been accounted for using the purchase method
of accounting and, accordingly, the purchase price has been allocated to the
tangible and intangible assets acquired and liabilities assumed on the basis of
their respective fair values on the acquisition date.
Launch made certain cash payments and issued 788,474 shares of its
common stock in exchange for all outstanding membership interests of C.C.R.L.,
based upon the negotiated value of the Company, as adjusted by specified
liabilities of the Company, and upon an average Launch closing stock price of
$6.98 over a trading period defined in the agreement governing the acquisition.
The terms of the acquisition also include contingent future purchase payments to
the sellers in either stock or cash, aggregating an amount not to exceed $23.5
million, based on annual and cumulative performance targets set for the
operations of the Warped Tour over the next five years.
The total purchase price of approximately $7.8 million is comprised of
788,474 shares of the Company's common stock with an estimated fair value of
approximately $5.5 million, a cash payment of $2.0 million and transaction costs
of approximately $250,000. For purposes of this pro forma combined financial
information, the excess purchase price over net tangible assets acquired is
estimated, on a preliminary basis, to be approximately $7.5 million and is being
amortized over an estimated useful life of 5 years.
The acquisition has been structured as a tax free exchange of stock;
therefore, the differences between the recognized fair values of acquired
assets, including intangible assets, and their historical tax bases are not
deductible for tax purposes.
The following unaudited pro forma combined statements of operations
give effect to this acquisition as if it had occurred on January 1, 1999, by
combining the results of operations of The Warped Tour with the results of
operations of Launch for year ended December 31, 1999 and the nine months ended
September 30, 2000.
The unaudited pro forma combined statements of operations are not
necessarily indicative of the operating results that would have been achieved
had the transactions been in effect as of the beginning of the periods presented
and should not be construed as being representative of future operating results.
The historical financial statements of Launch are included in its 1999
Form 10-K and its Form 10-Q for the quarter ended September 30, 2000. The
historical financial statements of The Warped Tour are included elsewhere in
this Form 8-K/A and the unaudited pro forma combined financial information
presented herein should be read in conjunction with those financial statements
and related notes.
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PRO FORMA COMBINED STATEMENT OF OPERATIONS
(unaudited)
For The Year Ended December 31, 1999
(in thousands, except per share amounts)
Launch The Warped Pro
Media, Inc. Tour Adjustments Forma
----------- ---------- ----------- -----
Net revenues
Advertising & transaction fees $8,959 $2,751 $11,710
Content licensing 5,442 - 5,442
Warped Tour tickets & other 4,045 4,045
Subscription & other 2,225 - 2,225
----------------------------- -------------
16,626 6,796 23,422
Operating expenses
Cost of revenues 3,493 - 3,493
Cost of tour operations 4,933 4,933
Sales & marketing 24,234 305 24,539
Content & product development 11,029 - 11,029
General & administrative 4,416 346 4,762
Depreciation & amortization 12,935 - $1,500 A 14,435
----------------------------- -------------
(Loss) income from operations (39,481) 1,212 (39,769)
Interest income & other, net 1,987 5 1,992
----------------------------- -------------
(Loss) income before provision for
income taxes (37,494) 1,217 (37,777)
Provision for income taxes 12 46 58
----------------------------- -------------
Net (loss) income (37,506) 1,171 (37,835)
Accretion of mandatory redeemable
convertible preferred stock (765) (765)
----------------------------- -------------
Net (loss) income attributable to
common stockholders $(38,271) $1,171 $(38,600)
============================= =============
Pro forma basic & diluted net loss per
share $(4.15) $(3.86)
=============== =============
Pro forma weighted average shares
outstanding 9,218 10,006
=============== =============
See accompanying notes to Pro Forma Combined Financial Information.
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PRO FORMA COMBINED STATEMENT OF OPERATIONS
(unaudited)
For The Nine Months Ended September 30, 2000
(in thousands, except per share amounts)
Launch The Warped Pro
Media, Inc. Tour Adjustments Forma
----------- ---------- ----------- -----
Net revenues
Advertising & transaction fees $14,938 $2,079 $(1,000) B $16,017
Content licensing 6,456 - 6,456
Warped Tour tickets & other 4,913 4,913
Subscription & other 1,412 - 1,412
----------------------------- -------------
22,806 6,992 28,798
Operating expenses
Cost of revenues 3,958 - 3,958
Cost of tour operations 5,321 5,321
Sales & marketing 23,504 816 (1,000) B 23,320
Content & product development 14,691 - 14,691
General & administrative 7,277 233 7,510
Depreciation & amortization 12,665 - 1,000 A 13,665
----------------------------- -------------
(Loss) income from operations (39,289) 622 (39,667)
Interest income & other, net 2,110 1 2,111
----------------------------- -------------
(Loss) income before provision for
income taxes (37,179) 623 (37,556)
Provision for income taxes 6 12 18
----------------------------- -------------
Net (loss) income $(37,185) $611 $(37,574)
============================= =============
Pro forma basic & diluted net loss per
share $(2.74) $(2.63)
=============== =============
Pro forma weighted average shares
outstanding 13,577 14,279
=============== =============
See accompanying notes to Pro Forma Combined Financial Information.
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NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(unaudited)
The following adjustments were applied to Launch's historical financial
statements and those of The Warped Tour to arrive at the pro forma combined
financial information:
(A) To record amortization of the estimated excess purchase price of
$7.5 million over the estimated useful life of 5 years.
(B) To eliminate intercompany sales and marketing expenses.
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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.
LAUNCH MEDIA, INC.
Date: November 14, 2000 By:/s/ Jeffrey M. Mickeal
----------------------
Jeffrey M. Mickeal
Chief Financial Officer and Secretary
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EXHIBIT INDEX
Exhibit No. Description
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23 Consent of PricewaterhouseCoopers LLP
2 Membership Interest Purchase Agreement dated as of June 12,
2000 by and among Launch, C.C.R.L., Creative Artists Agency,
LLC, Codikow & Carroll, P.C., 4 Fini, Inc. and Vans, Inc.
(incorporated by reference from Exhibit 2 to Launch's Form
8-K filed on September 14, 2000 with the Securities and
Exchange Commission).
99 Press release dated September 7, 2000 announcing the
completion of the acquisition (incorporated by reference
from Exhibit 99 to Launch's Form 8-K filed on September 14,
2000 with the Securities and Exchange Commission).