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
February 13, 2003
-----------------
(Date of report)
PROTOSOURCE CORPORATION
-----------------------
(Exact Name of Registrant as Specified in Charter)
CALIFORNIA 0-25594 77-0190772
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
One Bethlehem Plaza
Bethlehem, Pennsylvania 18018
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(Address of Principal Executive Offices)
(610) 332-2893
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
ITEM 2. Acquisition or Disposition of Assets
On February 13, 2003, Protosource Corporation, a Pennsylvania corporation
("Protosource" or the "Company") announced an agreement and plan of merger to
acquire all of the outstanding capital stock of P2i Newspaper, Inc., a Delaware
corporation ("P2i Newspaper") and a wholly owned subsidiary of P2i, Inc., a
Pennsylvania corporation ("P2i"), in exchange for the issuance of up to
19,383,531 shares of Protosource common stock (the "Agreement"). The 19,383,531
shares are to be reduced by the number of shares equal to the total fees
incurred to audit the financial statements of P2i or P2i Newspaper, divided by
$0.50 (the "Adjusted Shares"). The Adjusted Shares shall be subject to a
three-year lock-up, which may be released upon the stock price and volume
reaching established thresholds.
On January 1, 2004, the Company, P2i Newspaper and P2i amended the terms of
the Agreement (the "Amendment"). Pursuant to the terms of the Amendment, in
exchange for all of the issued and outstanding shares of P2i Newspaper, the
Company issued 198,836 shares of series B preferred stock (the "Preferred
Stock"), which shares shall be reduced by the total fees incurred to audit the
financial statements of P2i or P2i Newspaper, divided by $50.00. Each share of
Preferred Stock is exchangeable for 100 shares of the Company's common stock at
any time after the Company increases its authorized number of shares of common
stock to 100,000,000.
The acquisition of P2i Newspaper became effective on January 1, 2004, at
which time P2i Newspaper became a wholly owned subsidiary of the Company. P2i
Newspaper is a leader in the conversion of previously created print advertising
into interactive web products for newspaper, magazine and mail order/retail
catalog advertising. Clients include newspapers from the Gannett, Tribune and
McClatchy Newspaper groups. The company is headquartered in Bethlehem, PA, has
offices in New York and London, and a data conversion facility in Kuala Lumpur,
Malaysia.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
Compiled financial statements of P2i, Newspaper, Inc. are presented as of and
for each of the years ended December 31, 2002 and 2001, and as of and for each
of the nine-month periods ended September 30, 2003 and 2002.
(b) Pro Forma Financial Information
The following unaudited pro forma consolidated financial information presents
the pro forma consolidated balance sheet of ProtoSource Corporation and
Subsidiary at December 31, 2002 and 2001, and September 30, 2003, giving effect
to the agreement and Plan of Merger with P2i Newspaper, Inc., a Delaware
corporation, as if it had been consummated on those dates. Also presented are
the pro forma consolidated statements of operations for the years ended December
31, 2002 and 2001, and nine-month period ended September 30, 2003 of ProtoSource
Corporation and Subsidiary, giving effect to the agreement and Plan of Merger
with P2i Newspaper, Inc. as if it had been consummated as of the beginning of
the respective periods presented. For purposes of the computation of pro forma
weighted average number of basic and diluted common shares outstanding, it is
assumed that 19,300,000 of ProtoSource Corporation common shares will be
exchanged for P2i Newpaper, Inc. Also, no goodwill has been reflected in this
pro forma presentation as management believes that any goodwill acquired in this
transaction would be fully impaired.
The pro forma data is based on the historical combined statements of ProtoSource
Corporation and P2i Newspaper, Inc. giving effect to the purchase method of
accounting and to the assumptions and adjustments (which the Company believes to
be reasonable) described in the accompanying notes to the unaudited pro forma
consolidated financial information.
The pro forma data is provided for comparative purposes only. It does not
purport to be indicative of the results that actually would have occurred if
such agreement and Plan of Merger had been consummated on the dates indicated or
that may be obtained in the future. The unaudited pro forma combined financial
information should be read in conjunction with the notes thereto, the audited
financial statements of P2i Newspaper, Inc. for the years ended December 31,
2002 and 2001 and notes thereto, and the Company's consolidated financial
statements and related notes thereto, incorporated herein by reference.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
Historical Pro forma
-------------------------------------------- -------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
ASSETS
Current assets:
Cash $ 118,265 $ 4,013 $ 122,278 $ 122,278
Marketable securities 447,611 447,611 447,611
Accounts receivable 40,729 40,729 40,729
Notes receivable, P2i Newspaper, Inc. 50,000 50,000 (A) $ (50,000)
Prepaid expenses and other current assets 41,214 2,281 43,495 43,495
------------ ------------ ------------ ------------ ------------
Total current assets 697,819 6,294 704,113 (50,000) 654,113
Property and equipment, net 116,949 244,801 361,750 361,750
Deposits 8,564 4,368 12,932 12,932
Goodwill, net 77,857 77,857 77,857
Investment in corporation 226,000 226,000 226,000
------------ ------------ ------------ ------------ ------------
$ 1,127,189 $ 255,463 $ 1,382,652 $ (50,000) $ 1,332,652
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Notes payable $ 12,236 $ -- $ 12,236 $ 12,236
Current portion of obligations
under capital leases 24,666 23,713 48,379 48,379
Notes payable, ProtoSource Corporation 50,000 50,000 (A) $ (50,000) --
Due to P2i, Inc. 416,471 416,471 416,471
Accounts payable and accrued expenses 258,699 41,690 300,389 300,389
Deferred revenue 9,845 9,845 9,845
Due to related company 73,461 73,461 73,461
------------ ------------ ------------ ------------ ------------
Total current liabilities 305,446 605,335 910,781 (50,000) 860,781
------------ ------------ ------------ ------------ ------------
Obligations under capital leases,
non-current portion 49,414 32,675 82,089 82,089
------------ ------------ ------------ ------------
Stockholders' equity (deficiency):
Preferred stock -- -- -- --
Common stock 24,554,293 -- 24,554,293 24,554,293
Additional paid-in capital 392,745 392,745 392,745
Accumulated other comprehensive (loss) (161,637) (161,637) (161,637)
Accumulated deficit (24,013,072) (382,547) (24,395,619) (24,395,619)
------------ ------------ ------------ ------------
772,329 (382,547) 389,782 389,782
------------ ------------ ------------ ------------
$ 1,127,189 $ 255,463 $ 1,382,652 $ (50,000) $ 1,332,652
============ ============ ============ ============ ============
Notes:
(A) Represents elimination of intercompany note payable/receivable.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
Historical Pro forma
-------------------------------------------- ------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
Net revenues $ -- $ 1,023,291 $ 1,023,291 $ 1,023,291
Cost of revenues -- 606,883 606,883 606,883
------------ ------------ ------------ ------------
Gross profit -- 416,408 416,408 416,408
------------ ------------ ------------ ------------
Operating expenses:
Selling, general and administrative 588,592 646,972 1,235,564 1,235,564
Research and development 81,784 81,784 81,784
Depreciation and amortization 4,363 63,396 67,759 67,759
Impairment of investment 404,000 404,000 404,000
Stock compensation expense 283,882 283,882 283,882
------------ ------------ ------------ ------------
1,280,837 792,152 2,072,989 2,072,989
------------ ------------ ------------ ------------
Operating loss (1,280,837) (375,744) (1,656,581) (1,656,581)
------------ ------------ ------------ ------------
Other (charges):
Interest expense (880,866) (5,717) (886,583) (886,583)
Loss on sale of marketable securities (128,494) (128,494) (128,494)
Other expenses -- (1,086) (1,086) (1,086)
------------ ------------ ------------ ------------
(1,009,360) (6,803) (1,016,163) (1,016,163)
------------ ------------ ------------ ------------
Net loss from continuing operations $ (2,290,197) $ (382,547) $ (2,672,744) $ (2,672,744)
------------ ------------ ------------ ------------
Net loss per basic and diluted share
of common stock from continuing operations $ (0.47) $ (0.11)
============ ============
Weighted average number of basic and
diluted common shares outstanding 4,912,026 (A) 19,300,000 24,212,026
============ ============ ============
Notes:
(B) Represents estimated number of shares of ProtoSource common shares to be exchanged for P2i Newspaper, Inc.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002
Historical Pro forma
-------------------------------------------- -------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
ASSETS
Current assets:
Cash $ 2,671 $ 22,231 $ 24,902 $ 24,902
Marketable securities 10,924 10,924 10,924
Accounts receivable 188,405 188,405 188,405
Interest receivable 49,556 49,556 (B) $ (49,556) --
Notes receivable, P2i Newspaper, Inc. 1,045,280 1,045,280 (A) (1,045,280) --
Assets held for sale 178,115 178,115 178,115
Prepaid expenses and other current assets 2,651 2,508 5,159 5,159
------------ ------------ ------------ ------------ ------------
Total current assets 1,289,197 213,144 1,502,341 (1,094,836) 407,505
Property and equipment, net 48,005 256,341 304,346 304,346
Debt issuance costs, net 543,543 56,981 600,524 600,524
Investment in corporation 105,000 105,000 105,000
------------ ------------ ------------ ------------ ------------
$ 1,985,745 $ 526,466 $ 2,512,211 $ (1,094,836) $ 1,417,375
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Notes payable $ 1,125,000 $ -- $ 1,125,000 $ 1,125,000
Current portion of obligations
under capital leases 13,775 22,258 36,033 36,033
Notes payable, ProtoSource Corporation 1,045,280 1,045,280 (A) $ (1,045,280) --
Due to P2i, Inc. 418,039 418,039 418,039
Accounts payable and accrued expenses 396,786 291,284 688,070 (B) (49,556) 638,514
Deferred revenue 9,000 9,000 9,000
Liabilities to be assumed upon sale 155,332 155,332 155,332
Due to related company 76,434 76,434 76,434
------------ ------------ ------------ ------------ ------------
Total current liabilities 1,699,893 1,853,295 3,553,188 (1,094,836) 2,458,352
------------ ------------ ------------ ------------ ------------
Obligations under capital leases,
non-current portion 35,639 10,417 46,056 46,056
------------ ------------ ------------ ------------
Stockholders' equity (deficiency):
Preferred stock -- -- -- --
Common stock 25,635,960 -- 25,635,960 25,635,960
Additional paid-in capital 1,487,891 1,487,891 1,487,891
Accumulated other comprehensive (loss) (62,069) (62,069) (62,069)
Accumulated deficit (26,811,569) (1,337,246) (28,148,815) (28,148,815)
------------ ------------ ------------ ------------
250,213 (1,337,246) (1,087,033) (1,087,033)
------------ ------------ ------------ ------------
$ 1,985,745 $ 526,466 $ 2,512,211 $ (1,094,836) $ 1,417,375
============ ============ ============ ============ ============
Notes:
(A) Represents elimination of intercompany note payable/receivable.
(B) Represents elimination of accrued interest associated with the intercompany note payable/receivable.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
Historical Pro forma
-------------------------------------------- ------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
Net revenues $ -- $ 1,050,293 $ 1,050,293 $ 1,050,293
Cost of revenues -- 956,793 956,793 956,793
------------ ------------ ------------ ------------
Gross profit -- 93,500 93,500 93,500
------------ ------------ ------------ ------------
Operating expenses:
Selling, general and administrative 703,920 670,779 1,374,699 1,374,699
Research and development 181,952 181,952 181,952
Depreciation and amortization 8,726 101,465 110,191 110,191
Impairment of investment 121,000 121,000 121,000
------------ ------------ ------------ ------------
833,646 954,196 1,787,842 1,787,842
------------ ------------ ------------ ------------
Operating loss (833,646) (860,696) (1,694,342) (1,694,342)
------------ ------------ ------------ ------------
Other income (charges):
Interest expense (1,734,346) (89,213) (1,823,559) (A) $ 49,556 (1,774,003)
Interest income 49,615 49,615 (A) (49,556) 59
Loss on sale of marketable securities (272,944) (272,944) (272,944)
Other income 20,157 20,157 20,157
Other expenses -- (4,790) (4,790) (4,790)
------------ ------------ ------------ ------------ ------------
(1,937,518) (94,003) (2,031,521) -- (2,031,521)
------------ ------------ ------------ ------------ ------------
Net loss from continuing operations $ (2,771,164) $ (954,699) $ (3,725,863) $ -- $ (3,725,863)
============ ============ ============ ============ ============
Net loss per basic and diluted share
of common stock from continuing operations $ (0.44) $ (0.15)
============ ============
Weighted average number of basic and
diluted common shares outstanding 6,268,183 (B) 19,300,000 25,568,183
============ ============ ============
Notes:
(A) Represents elimination of interest income/expense associated with the intercompany note payable/receivable.
(B) Represents estimated number of shares of ProtoSource common shares to be exchanged for P2i Newspaper, Inc.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2003
Historical Pro forma
-------------------------------------------- ------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
ASSETS
Current assets:
Cash $ 40,428 $ 14,794 $ 55,222 $ 55,222
Accounts receivable 198,148 198,148 198,148
Interest receivable 125,214 125,214 (B) $ (125,214) --
Notes receivable, P2i Newspaper, Inc. 1,393,953 1,393,953 (A) (1,393,953) --
Assets held for sale 178,115 178,115 178,115
Prepaid expenses and other current assets 2,151 8,167 10,318 10,318
------------ ------------ ------------ ------------ ------------
Total current assets 1,739,861 221,109 1,960,970 (1,519,167) 441,803
Property and equipment, net 41,460 206,785 248,245 248,245
Deposits 1,500 7,500 9,000 9,000
Debt issuance costs, net 402,084 36,541 438,625 438,625
Investment in corporation 105,000 105,000 105,000
------------ ------------ ------------ ------------ ------------
$ 2,289,905 $ 471,935 $ 2,761,840 $ (1,519,167) $ 1,242,673
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Notes payable $ 1,725,000 $ -- $ 1,725,000 $ 1,725,000
Current portion of obligations
under capital leases 12,611 26,452 39,063 39,063
Notes payable, ProtoSource Corporation 1,393,953 1,393,953 (A) $ (1,393,953) --
Due to P2i, Inc. 193,758 193,758 193,758
Accounts payable and accrued expenses 524,951 464,990 989,941 (B) (125,214) 864,727
Deferred revenue 29,688 29,688 29,688
Liabilities to be assumed upon sale 155,332 155,332 155,332
Due to related company 72,231 72,231 72,231
------------ ------------ ------------ ------------ ------------
Total current liabilities 2,447,582 2,151,384 4,598,966 (1,519,167) 3,079,799
------------ ------------ ------------ ------------ ------------
Obligations under capital leases,
non-current portion 25,997 27,085 53,082 53,082
------------ ------------ ------------ ------------
Stockholders' equity (deficiency):
Preferred stock -- -- -- --
Common stock 26,235,960 -- 26,235,960 26,235,960
Additional paid-in capital 2,087,891 2,087,891 2,087,891
Accumulated deficit (28,507,525) (1,706,534) (30,214,059) (30,214,059)
------------ ------------ ------------ ------------
(183,674) (1,706,534) (1,890,208) (1,890,208)
------------ ------------ ------------ ------------
$ 2,289,905 $ 471,935 $ 2,761,840 $ (1,519,167) $ 1,242,673
============ ============ ============ ============ ============
Notes:
(A) Represents elimination of intercompany note payable/receivable.
(B) Represents elimination of accrued interest associated with the intercompany note payable/receivable.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2003
Historical Pro forma
-------------------------------------------- -------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
Net revenues $ -- $ 1,081,077 $ 1,081,077 $ 1,081,077
Cost of revenues -- 677,076 677,076 677,076
------------ ------------ ------------ ------------
Gross profit -- 404,001 404,001 404,001
------------ ------------ ------------ ------------
Operating expenses:
Selling, general and administrative 254,061 490,131 744,192 744,192
Research and development 81,850 81,850 81,850
Depreciation and amortization 6,545 110,893 117,438 117,438
------------ ------------ ------------ ------------
260,606 682,874 943,480 943,480
------------ ------------ ------------ ------------
Operating loss (260,606) (278,873) (539,479) (539,479)
------------ ------------ ------------ ------------
Other income (charges):
Interest expense (1,461,267) (80,803) (1,542,070) (A) $ 75,658 (1,466,412)
Interest income 75,658 75,658 (A) (75,658) --
Loss on sale of marketable securities (65,942) (65,942) (65,942)
Other income 16,201 16,201 16,201
Other expenses -- (9,612) (9,612) (9,612)
------------ ------------ ------------ ------------ ------------
(1,435,350) (90,415) (1,525,765) -- (1,525,765)
------------ ------------ ------------ ------------ ------------
Net loss from continuing operations $ (1,695,956) $ (369,288) $ (2,065,244) $ -- $ (2,065,244)
============ ============ ============ ============ ============
Net loss per basic and diluted share
of common stock from continuing operations $ (0.21) $ (0.08)
============ ============
Weighted average number of basic and
diluted common shares outstanding 7,943,410 (B) 19,300,000 27,243,410
============ ============ ============
Notes:
(A) Represents elimination of interest income/expense associated with the intercompany note payable/receivable.
(B) Represents estimated number of shares of ProtoSource common shares to be exchanged for P2i Newspaper, Inc.
Exhibits
Number Description
- ------ -----------
10.1 Form of Agreement and Plan of Merger, dated as of February 13, 2003,
by and among Protosouce Corporation, Protosource Acquisition LLC, P2i,
Inc. and P2i Newspaper, Inc. (previously filed)
10.2 Form of Amendment No. 1 to Agreement and Plan of Merger, dated as of
January 1, 2004, by and among Protosouce Corporation, Protosource
Acquisition LLC, P2i, Inc. and P2i Newspaper, Inc.
10.3 Financial Statements of P2i Newspaper, Inc. for the years ended
December 31, 2001 and December 31, 2002 and the nine months ended
September 30, 2003.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
PROTOSOURCE CORPORATION
(Registrant)
Date: January 15, 2004 /s/Peter Wardle
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Peter Wardle,
Chief Executive Officer