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: December 22, 1999
(Date of earliest event reported)
COMPU-DAWN, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
Delaware 000-22611 11-3344575
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File No.) (IRS Employer Identification
of incorporation) Number)
333 North First Street, Jacksonville, Florida 32250
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 249-5756
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Acquisition of GlobalPC, Inc.'s Assets
On July 30, 1999, Compu-DAWN and GPC Acquisition Corp., its wholly owned
subsidiary, entered into an Asset Purchase Agreement, which was amended on
September 24, September 26, as of November 23, and December 22, 1999 (the
"GlobalPC Agreement"), with GlobalPC, Inc. ("GlobalPC") and Mark Bradlee
("Bradlee") and Brian Dougherty ("Dougherty"), who are the principal
shareholders of GlobalPC, to purchase substantially all of the assets and to
assume certain liabilities of GlobalPC (the "GlobalPC Acquisition"). GlobalPC
has developed enhancements to GEOS, a simplified, user friendly, low cost
computer operating system owned by Geoworks, Inc. In addition, GlobalPC has
developed a series of software applications. The GEOS operating software, which
Compu-DAWN licenses from an unaffiliated third party, is to be embedded along
with application software developed by GlobalPC, in a state- of-the-art,
easy-to-use, low cost integrated Internet personal computer that comes
pre-loaded with an office productivity suite including a word processor,
spreadsheet, database and graphic program, as well as other programs including
games and online access software (the "GlobalPC Device"). The GlobalPC
Acquisition closed on December 22, 1999.
Assets Acquired
The assets acquired pursuant to the GlobalPC Acquisition include all
tangible personal property used in the operation of GlobalPC's business, all
accounts receivable of GlobalPC, all computer software and related assets, and
all rights of GlobalPC to any software licensed to GlobalPC.
The Purchase Price and Assumption of Liabilities
The purchase price for the assets in the GlobalPC Acquisition consists of:
(a) an aggregate of 634,284 Common Shares; (b) Class A Common Stock Purchase
Warrants (the "Class A Warrants"), exercisable to purchase (subject to
adjustment) 2,269,284 Common Shares; (c) Class B Common Shares Purchase Warrants
(the "Class B Warrants"), exercisable to purchase (subject to adjustment)
1,901,400 Common Shares; and (d) Class C Common Shares Purchase Warrants (the
"Class C Warrants"), exercisable to purchase (subject to adjustment) 383,000
Common Shares of Compu-DAWN. The Class A Warrants, the Class B Warrants and the
Class C Warrants are referred to collectively as the "Warrants." The Common
Shares issuable upon exercise of any of the Warrants are collectively referred
to as the "Warrant Shares." The Common Shares and the Warrants are to be issued
to potential subscribers in a private placement under Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
provided that Compu-DAWN is satisfied that the offer and issuance of Common
Shares and/or Warrants to such subscribers is exempt from the registration
provisions of the Securities Act and the similar provisions of any state
securities laws. If Compu-DAWN is not satisfied that such offering and sale is
not exempt from the registration of the Securities Act, then instead of issuing
the Common Shares and the Warrants to such subscribers, such securities will be
issued to GlobalPC. In either event, the shares of Common
2
<PAGE>
Shares to be issued will be subject to one year "lock-up" agreements between the
Company and certain of the accepted subscribers or GlobalPC, as the case may be.
The Common Shares and Warrants are valued in the aggregate at approximately
$17,000,000.
The terms of the Warrants are described below under the heading
"Description of the Warrants to be Issued".
Additionally, Compu-DAWN has agreed to pay GlobalPC a cash amount of up to
$275,000 to be utilized by GlobalPC to pay certain obligations.
In connection with the GlobalPC Acquisition, Compu-DAWN agreed to assume
certain specified liabilities of GlobalPC valued at approximately $1,400,000.
The amount and nature of the consideration was determined based upon the
value of the assets acquired net of liabilities, Compu-DAWN's prospects for the
future following the closing of the GlobalPC Acquisition compared to
Compu-DAWN's prospects if the GlobalPC Acquisition was not closed, and the
historical price of Compu-DAWN's Common Shares.
In connection with the value of the consideration, Compu-DAWN obtained a
fairness opinion from CapitalLink. L.C., an independent investment banker, which
has opined that the GlobalPC Acquisition is fair, from a financial point of
view, to the stockholders of Compu- DAWN.
Restrictive Covenant Agreements
Under the GlobalPC Agreement, Messrs. Bradlee and Dougherty agreed to a
restrictive covenant which among other things, (i) prohibits each of them from
engaging or participating in a business which is competitive with that of
Compu-DAWN for one year after the closing, (ii) prohibits each of them from
soliciting the business of any customer or prospective customer of Compu-DAWN,
and (iii) prohibits them from divulging any of Compu-DAWN's confidential
information.
Post-Closing Composition of the Board of Directors
As provided in the GlobalPC Agreement, the two current vacancies on the
Company's Board of Directors have been filled by Messrs. Bradlee and Dougherty.
They have been designated as Class I directors whose terms expire at
Compu-DAWN's annual meeting of stockholders in 2000 (excluding the meeting
scheduled for January 20, 2000).
Description of Warrants to be Issued
Class A Warrants
Each Class A Warrant is exercisable at a price of $2.50 per Warrant Share
either in cash or pursuant to a net issue exercise. A net issue exercise allows
the warrantholder to exercise
3
<PAGE>
warrants, and in payment of the purchase price, Compu-DAWN will withhold a
number of Warrant Shares equal in value to the amount of the exercise price. The
Class A Warrants may be exercised during the period starting on April 1, 2002
and ending on June 30, 2004. During this exercise period, the Class A Warrants
may be exercised at any time to purchase the following number of Warrant Shares,
subject to the restriction, and limitations described below:
- If there are 150,000 to 200,000 registered users of to Compu-DAWN's or
its affiliates' Internet access service to the Internet through
Compu-DAWN's GlobalPC Device (the "Milestone Users") on March 31,
2002, the Class A Warrants may be exercised to purchase up to 50% of
the Warrant Shares underlying the Class A Warrants only.
- If there are 200,001 to 250,000 Milestone Users on March 31, 2002, the
Class A Warrants may be exercised to purchase up to 75% of the Warrant
Shares underlying the Class A Warrants only.
- If there are 250,001 or more Milestone Users on March 31, 2002, the
Class A Warrants may be exercised to purchase up to all of the Warrant
Shares underlying the Class A Warrants.
- If there are less than 150,000 Milestone Users on March 31, 2002, the
Class A Warrants shall not be exercisable at all and shall be
automatically canceled, and the Warrant holders will have no rights
under the Class A Warrants.
In the event there is a change in control in the Company, the Class A
Warrants shall become exercisable to purchase 100% of the Warrant Shares
thereunder on the date preceding the change in control. For this purpose,
"change in control" means
- any transfer of 50% of the Company's outstanding Common Shares or
voting power. except in connection with any acquisition of Company
Common Shares by certain members of the Company's management.
- the approval by the Company's stockholders of a merger or
consolidation in which the pre-merger or pre-consolidation
stockholders of the Company do not own more than 50% of the voting
power of the merged or consolidated entity; or
- the transfer of more than 50% of the Company's assets.
- a change in the composition of the Board of Directors of Compu-DAWN
where those persons who were directors at the beginning of a calendar
year and those persons elected as directors during such calendar year
with the approval of a majority of directors then still in office
cease to constitute a majority of the directors.
Additionally, the Class A Warrants are not exercisable to purchase any
Warrant Shares if Compu-DAWN is required to obtain stockholder approval for the
issuance of those Warrant Shares under Rule 4310(c)(25)(H) of the Nasdaq Stock
Market, Inc., which relates to the requirement for stockholder approval for the
issuance of securities in certain instances, and
4
<PAGE>
Compu-DAWN has not obtained the required stockholder approval. Compu-DAWN cannot
assure that it will be able to obtain the stockholder approval required by the
NASDAQ rules, or if it does obtain it, Compu-DAWN cannot predict when that
approval will be obtained. If the required stockholder approval is not obtained,
the Class A Warrant holders will not be able to exercise his warrants for the
number of Common Shares which requires stockholders' approval for issuance.
Compu-DAWN will not issue any fractional Common Shares upon exercise of the
Class A Warrants and all fractional interests shall be eliminated.
The exercise price and the number of Warrant Shares issuable upon the
exercise of the Class A Warrant will be adjusted in case of the following
events:
- Compu-DAWN declares a dividend or other distribution on its Common
Shares payable in Common Shares.
- Compu-DAWN undertakes subdivision of the outstanding Common Shares
pursuant to a stock split or otherwise.
- Compu-DAWN combines the outstanding Common Shares into a smaller
number of Common Shares pursuant to a reverse split or otherwise.
- Compu-DAWN reclassifies or otherwise changes the Common Shares.
In the case of any of the above events, the exercise price will be adjusted up
or down as appropriate. Furthermore, the number of Warrant Shares issuable upon
the exercise of the Class A Warrants will be adjusted up or down as appropriate.
If Compu-DAWN undertakes or participates in a reorganization, consolidation or
merger, the Class A Warrant holder will be entitled to receive, instead of
Warrant Shares receivable upon the exercise of a Class A Warrant before the
consummation of that transaction, the securities or properties which the Class A
Warrant holder would have been entitled to at the time of the consummation of
the transaction if the Class A Warrant holder had exercised his Class A Warrants
before the consummation of the transaction.
Class B Warrants
Each Class B Warrant is exercisable at a price of $2.50 per Warrant Share,
either in cash or pursuant to a net issue exercise. The Class B Warrants may be
exercised at any time, subject to the same restrictions and limitations
described above under the description of the Class A Warrants, during the
periods commencing below and ending on June 30, 2004, for the following number
of Warrant Shares:
- Up to 30% of the Warrant Shares underlying the Class B Warrants on and
after the 90th day following the date of the Class B Warrant; and
5
<PAGE>
- Additionally, up to 23 1/3% of the Warrant Shares underlying the Class
B Warrants on and after each of the first, second and third
anniversary of the date of the Class B Warrants.
In the event there is a change in control in the Company, the Class B
Warrant shall become exercisable to purchase all of the Warrant Shares
thereunder on the date preceding the change in control as described under "Class
A Warrants" above.
The other terms and provisions of the Class B Warrants relating to the
limitations on exercise due to required stockholder approval under the rules of
the Nasdaq Stock Market, Inc., exercise period, adjustments of the exercise
price and number of Warrant Shares, other restrictions on exercise, and
restrictions on transfer, are substantially similar to those terms and
provisions in the Class A Warrants described above.
Class C Warrants
Each Class C Warrant is exercisable at a price of $2.50 per Warrant Share,
either in cash or pursuant to a net issue exercise. The Class C Warrants may be
exercised at any time, subject to the same restrictions and limitations
described above under the description of Class A Warrants, during the period
commencing on the first anniversary of the date of the Class C Warrants and
ending on June 30, 2004.
In the event there is a change in control in the Company, the Class C
Warrant shall become exercisable to purchase all of the Warrant Shares
thereunder on the date preceding the change in control as described under "Class
A Warrants" above.
The other terms and provisions of the Class C Warrants relating to the
limitations on exercise due to required stockholder approval under the rules of
the Nasdaq Stock Market, Inc., exercise period, adjustments of the exercise
price and number of Warrant Shares, other restrictions on exercise, and
restrictions on transfer, are substantially similar to those terms and
provisions in the Class A Warrants described above.
6
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired. The Financial Statements
requried by Item 7(a) will be filed by amedment to this Curent Report
on Form 8-K pursuant Item 7(a)(4).
(b) Pro Forma Financial Information. The Financial Statements required by
Item 7(b) will be filed by amendment to this Current Report on Form
8-K to Item 7(a)(4).
7
<PAGE>
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.
COMPU-DAWN, INC.
Dated: January 6, 2000 By: /s/ Paul K. Danner
---------------------------------
Paul K. Danner,
Chief Executive Officer
8
<PAGE>
