8-K 1 a2059460z8-k.txt 8K UNITED STATES 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) September 6, 2001 ------------------------------------ Commission file Number 000-26839 SNAP2 CORPORATION (Exact Name of Registrant as Specified in its Charter) ------------------------------------ NEVADA 88-0407246 ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 10641 JUSTIN DRIVE 50322 URBANDALE, IOWA ---------- --------------- (Zip Code) (Address of principal executive offices) (515) 331-0560 (Registrant's Executive Office Telephone Number) Item 2. Acquisition or Disposition of Assets On September 6, 2001 Registrant, together with its wholly-owned subsidiary ISES Canada Incorporated, a Canadian corporation, entered into an Asset Purchase Agreement with Inflight Digital Limited, a company incorporated under the laws of England and Wales ("Buyer"). Pursuant to the Agreement, Registrant and its subsidiary (collectively "Seller") have agreed to sell to the Buyer all of Seller's inflight entertainment ("IFE") assets comprising its IFE business segment. The IFE assets include all of Seller's rights and obligations under its contracts with airline operators for the provision of IFE products and services, Seller's rights and obligations under license and distribution agreements relating to its IFE business, a perpetual, royalty-free, exclusive worldwide license to use for IFE business, Seller's intangible properties and rights relating to its IFE business, Seller's files, books and records relating to its IFE assets and other tangible property and physical assets used by Seller solely in connection with IFE business. Registrant will continue its business activities as a software developer and software service provider for embedded systems including set-top boxes for interactive television and Internet appliances for the consumer electronics market. Management believes that the sale of the IFE business segment will enhance Registrant's ability to expand its other business activities. The total purchase price for the sale and license of the IFE assets is $1,500,000 which amount will be reduced by an amount equal to the aggregate total of all prepaid maintenance revenues received by Registrant prior to the closing date. The closing of the transaction contemplated by the Agreement is subject to a number of conditions including, but not limited to, conditions that between the date of the Agreement and the Closing Date (as defined in the Agreement), there shall have been no material adverse change in Registrant's IFE business and Registrant shall have received any consents necessary under its agreements with airline operators to the transfer of the various contracts. The Agreement also provides for reductions in the purchase price if not all consents are received. The Agreement was entered into prior to the September 11, 2001 terrorist attacks in the United States. Registrant can not predict what impact, if any, such events may have on the proposed transaction. Item 5. Other Events In connection with the event described in Item 2 above, Registrant acquired 100% of the issued and outstanding stock of ISES Canada Incorporated, a Canadian corporation incorporated under the laws of Ontario with its principal office in Toronto, Canada. ISES Canada Incorporated was affiliated with the Registrant in that Registrant's controlling shareholder also owned an interest in ISES Canada Incorporated and Registrant contracted with ISES Canada Incorporated on a regular basis for software design and consulting services. The purchase price for all of the shares of stock of ISES Canada Incorporated was $105,630 (Canadian). ISES Canada Incorporated had previously done software development work for the Registrant and in order to effectively transfer all rights and intellectual property included in the sale of Registrant's IFE business segment, it was deemed necessary to include ISES Canada Incorporated as a Seller and that the transaction would be facilitated by making this entity a wholly-owned subsidiary of Registrant. 2 Item 7. Financial Statements and Exhibits (b) (1) ProForma Financial Information UNAUDITED PRO FORMA HISTORICAL FINANCIAL STATEMENTS The Unaudited Pro Forma Historical Financial Statements for the Registrant give effect to the Registrant disposing and licensing of the inflight entertainment ("IFE") assets. See Item 2 for description of this transaction. The following unaudited pro forma statements of operations and pro forma balance sheet of the Registrant give effect to the disposal and licensing of the IFE assets as if the transaction had occurred as of the beginning of the period presented or at the balance sheet date. The following unaudited pro forma statements of operations and pro forma balance sheet are based on historical financial data, and on assumptions described in the notes thereto. All such assumptions and adjustments are inherently subject to significant uncertainty and contingencies. The unaudited pro forma historical financial information should be read in conjunction with the Registrant's financial statements and the related notes appearing in the Registrant's Annual Report on Form 10-KSB dated December 29, 2000 and Quarterly Report on Form 10-QSB dated August 10, 2001. 3 SNAP2 CORPORATION UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2001

4 Notes to Unaudited Pro Forma Statement of Operations for the nine months ended June 30, 2001 The following notes to the pro forma adjustments for the unaudited Statement of Operations for the nine months ended June 30, 2001 set forth the adjustments necessary to reflect the entire disposition and license of IFE assets as if this had occurred on October 1, 2000. (1) Eliminate the IFE revenue due to the disposal and license of IFE assets. (2) Eliminate commissions attributable to the disposal and license of IFE assets. (3) Eliminate interest expense due to payoff of debt. 5 SNAP2 CORPORATION UNAUDITED PRO FORMA BALANCE SHEET AS OF JUNE 30, 2001

6 Notes to Unaudited Pro Forma Balance Sheet As of June 30, 2001 The following notes to the pro forma adjustments for the unaudited Balance Sheet as of June 30, 2001 set forth the adjustments necessary to reflect the entire disposition and license of IFE assets as if this had occurred on June 30, 2001. (1) Record net amount of cash received from the disposal and license of IFE assets after adjustments for deferred income, proceeds kept in escrow, payout of debt and related interest. (2) Record escrow equal to 10% of the proceeds. The Registrant does not expect any material adjustments to the purchase price. (3) Eliminate the deferred income attributable to the IFE assets. (4) Eliminate debt and related interest to be paid off with proceeds from the disposal and license of IFE assets. (5) Record the gain on the disposal and license of IFE assets. 7 SNAP2 CORPORATION UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2000

8 Notes to Unaudited Pro Forma Statement of Operations for the twelve months ended September 30, 2000 The following notes to the pro forma adjustments for the unaudited Statement of Operations for the twelve months ended September 30, 2000 set forth the adjustments necessary to reflect the entire disposition and license of IFE assets as if this had occurred on October 1, 1999. (1) Eliminate the IFE revenue due to the disposal and license of IFE assets. (2) Eliminate commissions attributable to the disposal and license of IFE assets. (3) Eliminate interest expense due to payoff of debt. 9 (c) Exhibits 2. Asset Purchase Agreement dated September 6, 2001 by and among Registrant and ISES Canada Incorporated (a wholly-owned subsidiary of Registrant), as Sellers and Inflight Digital Entertainment as Buyer. 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. SNAP2 CORPORATION Registrant By /s/ Dean R. Grewell, III ------------------------------------- Dean R. Grewell, III President & Chief Executive Officer Date: September 21, 2001 EX-2 Asset Purchase Agreement 10

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