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 and Exchange Act of 1934
August 28, 1996
(Date of Report (Date of Earliest Event Reported))
GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
(Exact name of registrant as specified in its charter)
DELAWARE 2741 95-4578632
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Classification Identification
of incorporation Code Number) Number)
or organization)
5548 Lindbergh Lane
Bell, California 90201-6410
(213) 980-4300
(Address, including ZIP code, and telephone number, including area code,
of registrant's principal executive offices)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
See Item 2 below.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 28, 1996, the Registrant completed the acquisition
of Kelly Russell Studios, Inc. ("KRSI" or "Kelly Russell") through a merger
(the "KRSI Merger") of KRSI into a wholly owned subsidiary of the
Registrant. The former shareholders of KRSI received one share of common
stock, $.01 par value per share ("Common Stock") for every two shares of
KRSI common stock owned on the effective date of the KRSI Merger. The KRSI
Merger was accounted for as a "purchase."
Concurrently with the KRSI Merger, the Registrant acquired
its affiliate, OSP Publishing Inc.("OSP"), and OSP's wholly owned subsidiary
The Button Exchange, Inc. ("BEx") through a merger of OSP (the "OSP
Merger") and BEx (the "BEx Merger") into wholly owned subsidiaries of the
Registrant. The OSP Merger and the BEx Merger are referred to as the
"Reorganization"). The Reorganization was accounted for as a "put
together" (which is similar to a "pooling of interests") because of the
prior affiliation between Registrant and OSP. The former shareholders of
OSP received 3,941.5892 shares of Common Stock for each share of OSP common
stock owned on the effective date of the OSP Merger. As a result of the
OSP Merger, Joseph C. Angard and Michael A. Malm acquired 4,643,192 (35.7%)
and 1,805,248 (13.9%) of the outstanding Common Stock.
Prior to the KRSI Merger and the Reorganization, the
Registrant received subscriptions for 4,324,238 shares of Common Stock to
investors in a private placement (the "Private Placement"), subject only to
completion of the KRSI Merger and the Reorganization. Net proceeds (less
commissions and expenses and distributions) to Global One as a result of the
Private Placement were $2,856,000. The KRSI Merger, the Reorganization and the
Private Placement are referred to herein as the "Transactions."
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN BANK'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
Not applicable.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements. Page No
Audited Financial Statements for OSP Publishing, Inc.
and Kelly Russell Studios, Inc. at December 31, 1995
and for the three years then ended are incorporated by
2
<PAGE>
reference from Registrant's Registration Statements on
Form S-4 (333-4655). *
(b) Pro Forma Financial Statements.
Unaudited Pro Forma Financial Statements as of and for
the year ended December 31, 1995 are incorporated by
reference from Registrant's Registration Statement on
Form S-4 (333-4655). *
Unaudited Pro Forma Condensed Combined Statements of
Operations for the six months ended
June 30, 1996.....................................4
Unaudited Comparative Per Share Data for the six months
ended June 30, 1996...............................7
Unaudited Pro Forma Condensed Combined Balance Sheet at
June 30, 1996.....................................8
Notes to Unaudited Pro Forma Condensed Combined
Financial Statements.............................10
- ----------
* Not applicable.
3
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial
information gives effect to the Transactions as if they had occurred as of
January 1, 1996 for the unaudited pro forma condensed combined statement of
operations and other financial data and as of June 30, 1996 for purposes of
the unaudited pro forma condensed combined balance sheet data using the
purchase method of accounting. Prior to the Transactions, Global One had
no operations and no significant assets.
The Unaudited Pro Forma Condensed Combined Financial Statements
do not purport to present the actual financial position or results of
operations of Global One had the transactions and events assumed therein in
fact occurred on the dates specified, nor are they necessarily indicative
of the results of operations that may be achieved in the future. The
following Unaudited Pro Forma Condensed Combined Statements of Operations
do not reflect cost savings that may result from the Transactions. The
Unaudited Pro Forma Condensed Combined Financial Statements are based on
certain assumptions and adjustments described in the notes to the Unaudited
Pro Forma Condensed Combined Financial Statements and should be read in
conjunction therewith and with the Consolidated Financial Statements of the
OSP and Kelly Russell and the related notes thereto incorporated herein by
reference.
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GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
OSP Kelly Russell Adjustments Combined
---------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
NET SALES........................................$20,330 $ 1,608 $ $21,938
COST OF SALES.................................... 13,296 954 14,250
------- --------- -------- -------
GROSS PROFIT 7,034 654 0 7,688
OPERATING EXPENSES:
Warehouse and selling 4,853 4,853
General and
administrative 3,513 1,735 216(1) 5,464
------- --------- -------- -------
Total operating
expenses 8,366 1,735 216 10,317
------- --------- -------- -------
OPERATING LOSS (1,332) (1,081) (216) (2,629)
INTEREST EXPENSE 597 29 626
------- --------- -------- -------
LOSS BEFORE INCOME TAXES
AND MINORITY INTEREST (1,929) (1,110) (216) (3,255)
INCOME TAX PROVISION 58 58
------- --------- -------- -------
LOSS BEFORE MINORITY
INTEREST (1,987) (1,110) (216) (3,313)
MINORITY INTEREST (94) (94)
------- --------- -------- -------
NET LOSS $(1,893) $ (1,110) $ (216) (3,219)
======= ========= ======== =======
(Continued)
</TABLE>
5
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GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1996
(In thousands, except per share data)
PRO FORMA NET LOSS DATA:
Loss before income taxes and minority interest.......$ (3,255)
Pro forma benefit for income taxes................... (1,210)(3)
Minority interest.................................... (94)
---------
Pro forma net loss...................................$ (1,951)
=========
PRO FORMA NET LOSS PER SHARE:
Pro forma net loss...................................$ (0.15)
=========
Pro forma weighted average shares outstanding...... 13,011(2)
=========
See accompanying notes to Unaudited Pro Forma condensed Combined Financial
Statements.
(concluded)
6
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GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
UNAUDITED COMPARATIVE PER SHARE DATA
(In thousands, except per share data)
The following summary of comparative per share data sets forth certain
historical information for OSP and Kelly Russell, certain pro forma
information for Global One after giving effect to the KRSI Merger as a
purchase for accounting purposes, as if the KRSI Merger had been
consummated at January 1, 1996 and equivalent pro forma information for
Kelly Russell based on the pro forma Global One information. No cash
dividends were paid during the periods presented.
Six Months Ended
June 30, 1996
----------------
Historical:
OSP
Net income (loss)(3)................................$ (0.24)
Weighted average shares outstanding................. 8,037
Period-end book value(4)............................$ (0.46)
Period-end shares outstanding....................... 6,448
Kelly Russell
Net loss before extraordinary item..................$ (0.27)
Weighted average shares outstanding................. 4,082
Period-end book value(4)............................$ (0.02)
Period-end shares outstanding....................... 4,082
Pro Forma Combined (5)
Global One
Net loss before extraordinary item..................$ (0.15)
Weighted average shares outstanding................. 13,101
Period-end book value(4)............................ (0.29)
Period-end shares outstanding....................... 13,101
Pro forma combined
Equivalent Kelly Russell share(6)
Net loss before extraordinary item................$ (0.08)
Period-end book value(4)..........................$ 0.15
See accompanying notes to Unaudited Pro Forma condensed Combined Financial
Statements.
(Continued)
7
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GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of June 30, 1996
(In thousands, except per share data)
The following Unaudited Pro Forma Condensed Combined Balance
Sheet sets forth historical balance sheet information for OSP and Kelly
Russell at June 30, 1996.
ASSETS
<TABLE>
<CAPTION>
At June 30, 1996
---------------------------------------------------------------------------
Historical
Historical Kelly Pro Forma Pro Forma
OSP Russell Adjustments Combined
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.....................$ 135 $ 73 $ 1,311(7) $ 1,519
Accounts receivable --
trade, net of allowance
for doubtful accounts......................... 5,355 337 5,692
Inventories.................................... 5,196 305 5,501
Prepaid royalty advances....................... 955 96 1,051
Prepaid expenses and
other current assets.......................... 615 139 754
Deferred income tax asset...................... 850(8) 850
------- ------------- ------------- -----------
Total current assets......................... 12,256 950 2,161 15,367
PROPERTY AND EQUIPMENT, Net......................... 1,142 230 1,372
GOODWILL, Net....................................... 134 4,319(9) 4,453
DEPOSITS............................................ 479 479
------- ------------- ------------- -----------
TOTAL..............................................$ 14,011 $ 1,180 $ 6,480 $ 21,671
======== ============= ============= ===========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements. (continued)
8
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LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
At June 30, 1996
------------------------------------------------------------------------------
Historical
Historical Kelly Pro Forma Pro Forma
OSP Russell Adjustments Combined
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable..............................$ 5,042 $ 710 $ 5,752
Accrued expenses............................... 1,152 463 1,615
Royalties payable.............................. 2,056 94 2,150
Due to customers............................... 226 226
Current maturities of:
Capitalized lease
obligations................................. 85 85
Subordinated
long-term debt.............................. 1,050 (375)(7) 675
------ ------ ------- --------
Total current
liabilities................................... 9,611 1,267 (375) 10,503
------ ------ ------- --------
REVOLVING LINE OF
CREDIT............................................ 4,903 4,903
CAPITALIZED LEASE
OBLIGATIONS....................................... 109 109
SUBORDINATED LONG-TERM
DEBT.............................................. 1,857 1,857
MINORITY INTEREST................................... 476 476
COMMITMENTS AND
CONTINGENCIES
SHAREHOLDERS' EQUITY
(DEFICIENCY):
Common stock................................... 1,263 41 22(10)(7) 1,326
Additional paid-in
capital....................................... 112 8,133 72(11)(7) 8,317
Accumulated deficit............................ (4,320) (8,261) 6,761(8) (5,820)
------ ------- -------- -------
Total
shareholders' equity
(deficiency)................................. (2,945) (87) 6,855 3,823
------ ------- -------- -------
TOTAL..............................................$ 14,011 $ 1,180 $6,480 $21,671
====== ======= ======== =======
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
(concluded)
9
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(In thousands, except share data)
(1) Represents the amortization of the excess of purchase price over net
liabilities assumed over a ten year life.
(2) Assumes for all periods presented the issuance of 2,041,187 shares of
Global One Common Stock to effect the KRSI Merger, as well as
4,324,238 shares deemed to be sold in the Private Placement.
(3) Assumes pro forma treatment of income taxes for OSP being treated as a
C Corporation and recognition of the deferred income tax asset as of
June 30, 1996. See Note 10 to OSP's audited consolidated financial
statements which are incorporated herein by reference.
(4) Based on the actual or pro forma number of shares outstanding at the
end of the respective period.
(5) Assumes a Conversion Ratio of 0.5 shares of Global One Common Stock
for each share of Kelly Russell Common Stock as well as application of
the net proceeds from completion of the Transactions.
(6) Represents the pro forma equivalent of one share of Kelly Russell
Common Stock calculated by multiplying pro forma Global One data by
the assumed Conversion Ratio of 0.5 shares of Global One Common Stock
for each share of Kelly Russell Common Stock.
(7) The proceeds from the Private Placement will be used as follows:
Proceeds from issuance of common stock.... $6,486
Less Transaction costs.................... 2,450
--------
4,036
Payment of S Corporation distribution..... 1,750
Estimated dividend to the OSP Shareholders
for actual tax liabilities............... 600
Repayment of subordinated debt.............. 375
--------
Cash for working capital.................... $1,311
========
(continued)
10
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(8) Reflects the following:
Declaration of a dividend payable to the OSP
Shareholders........................... $(1,750)
Estimated dividend to the OSP Shareholders
for actual tax liabilities............. (600)
Recognition of OSP deferred income tax
assets from change to C Corporation.... 850
Elimination of Kelly Russell accumulated
deficit................................ 8,261
--------
$ 6,761
========
(9) The acquisition of Kelly Russell will be accounted for as a purchase,
applying the provisions of Accounting Principles Board Opinion No. 16.
The total purchase cost will be allocated to Kelly Russell's assets
and liabilities based on their relative fair values as of the
Effective Time of the KRSI Merger, based on valuations and other
studies that are not yet complete. Accordingly, the excess of the
purchase cost over the historical book value of the net liabilities
assumed has not yet been fully allocated to the individual assets and
liabilities acquired. Management believes there will be no
significant change in the allocation of the purchase price once the
final analysis is completed. Therefore, the excess purchase cost over
the net assets acquired has been allocated to goodwill.
Purchase cost of equity.................... $ 3,062
Plus acquiror's portion of costs
associated with the Merger................ 635
Less book value of net liabilities assumed
at June 30, 1996, net of KRSI's portion of
costs associated with the Merger of $535.. 622
------
Cost in excess of net liabilities assumed... $4,319
=======
Merger and Offering costs consist principally of legal and accounting
fees, printing, and investment banking costs. These costs have been
allocated between the cost of new equity, acquisition of KRSI and
KRSI's costs of selling its business which will be expensed by KRSI.
(continued)
11
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(10) Reflects the following:
Common Stock issued to effect the
KRSI Merger................................. $ 20
Common Stock issued in the
Private Placement........................... 43
Elimination of Kelly Russell Common Stock.... (41)
-------
$ 22
========
(11) Reflects the following:
Common Stock issued to effect the
KRSI Merger........................... $ 3,042
Common Stock issued in the
Private Placement..................... 6,443
Transaction costs associated with the
Private Placement..................... (1,280)
Elimination of Kelly Russell
additional paid-in capital............ (8,133)
--------
$ 72
========
(concluded)
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(c) Exhibits. Page No.
2.1 Final Amended and Restated Agreement and
Plan of Merger.................................*
23.1 Consent of Deloitte & Touche LLP................14
23.2 Consent of McGladrey & Pullen, LLP..............15
- -------------------------------
* Incorporated by reference from the Registrant's Registration Statement
on Form S-4 (Registration No. 333-4655).
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
SIGNATURES
Under the requirements of the Securities and Exchange Act of 1934,
Global One Distribution & Merchandising Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: September 11, 1996.
GLOBAL ONE DISTRIBUTION &
MERCHANDISING INC.
By /s/ Christopher B. Lucas
-----------------------------
Christopher B. Lucas
Chief Financial Officer
13
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Form 8-K of
our report dated April 5, 1996 (May 24, 1996 as to Note 14)
relating to the financial statements of OSP Publishing, Inc.
appearing in the Registration Statement No. 333-4655 on Form S-4
of Global One Distribution & Merchandising Inc.
DELOITTE & TOUCHE LLP
Long Beach, California
September 11, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Form
8-K of our report dated March 11, 1996 relating to the financial
statements of Kelly Russell Studios, Inc. (Kelly Russell) as of
December 31, 1994 and 1995 and for each of the three years in the
period ended December 31, 1995 (which report contained an
explanatory paragraph discussing Kelly Russell's ability to
continue as a going concern) appearing in the Registration
Statement on Form S-4 (Registration No. 333-4655).
McGLADREY & PULLEN, LLP
September 11, 1996
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