<PAGE>
U.S. 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
Date of Report (Date of Earliest Event Reported): March 1, 2000
EPICEDGE, INC.
(Exact Name of Registrant as Specified in Charter)
Texas
(State or Other Jurisdiction of
Incorporation or Organization)
0-9129 75-1657943
(Commission File Number) (I.R.S. Employer Identification No.)
3200 Wilcrest, Suite 370, Houston, Texas 77042
(Address of principal executive offices including zip code)
(713) 784-2374
(Registrant's telephone number, including area code)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Inapplicable
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 1, 2000, EpicEdge, Inc. (the "Company") acquired all of the issued
and outstanding stock of The Growth Strategy Group, Inc., ("Growth Strategy") a
marketing and strategic planning firm, in an arm's length transaction between
the "Company" and all of the shareholders of Growth Strategy. The consideration
for the acquisition was: (1) 277,000 shares of the Company's common stock valued
at $6,076,800, and (2) $ 375,000 cash. The three stockholders of Growth Strategy
entered into employment agreements with the Company. These employment agreements
terminate in February 2003 and include a non-compete provision for the term of
the agreement and one year thereafter. However, the Company can provide no
assurance the non-compete will be enforceable. This transaction has been
accounted for as a purchase and resulted in goodwill of approximately $6.4
million, which will be amortized over eight years.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Inapplicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Inapplicable.
ITEM 5. OTHER EVENTS
Inapplicable.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
Inapplicable.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
The financial statements relating to the acquisition required pursuant
to Article 310(c) of Regulation S-B are attached hereto as Annex A.
(b) Pro Forma Financial Information
The pro forma financial information relating to the acquisition
required pursuant to Article 310(d) of Regulation S-B is attached
hereto Annex B.
ITEM 8. CHANGE IN FISCAL YEAR
Inapplicable.
<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.
EPICEDGE, INC.
By: /s/ Robert E. Nelson
-----------------------
Robert E. Nelson
Chief Financial Officer
DATE: May 15, 2000
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
<TABLE>
<S> <C>
i. Independent Auditors' Report F-1
ii. Balance Sheets as of March 31, 1999 and December 31, 1999 (unaudited) F-2
iii. Statements of Operations for the years ended March 31, 1998 and 1999 and for
the nine month periods ended December 31, 1998 and 1999 (unaudited) F-3
iv. Statements of Shareholders' Deficit for the years ended March 31, 1998 and
1999 and for the period ended December 31, 1999 (unaudited) F-4
v. Statements of Cashflows for the years ended March 31, 1998 and 1999 and
for the nine month periods ended December 31, 1998 and 1999 (unaudited) F-5
vi. Notes to Financial Statements F-6
(b) Pro Forma Financial Statements (unaudited). P-1
i. Pro Forma Condensed Balance Sheet at December 31, 1999 P-2
ii. Pro Forma Condensed Statement of Operations for the year ended
December 31, 1999 P-3
iii. Notes to Pro Forma Financial Statements P-4
ITEM 8. CHANGE IN FISCAL YEAR
Inapplicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Inapplicable.
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Directors and Shareholders of The Growth Strategy Group, Inc.:
We have audited the accompanying balance sheet of The Growth Strategy Group,
Inc. ("Growth Strategy") as of March 31, 1999, and the related statements of
income, shareholders' deficit, and cash flows for each of the years ended March
31, 1998 and 1999. 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 in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Growth Strategy as of March 31, 1999 and the
results of its operations and its cash flows for each of the years ended
March 31, 1998 and 1999 in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
Dallas, Texas
May 5, 2000
F-1
<PAGE>
THE GROWTH STRATEGY GROUP, INC.
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
ASSETS March 31, 1999
1999 (Unaudited)
---------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,840 $ 7,761
Accounts receivable 113,926 167,001
Prepaid expenses 2,748 0
-------- --------
Total current assets 125,514 174,762
PROPERTY AND EQUIPMENT - net 13,750 11,914
-------- --------
TOTAL $139,264 $186,676
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Line of credit and other notes payable 37,650 14,917
Accounts payable - trade 85,702 83,056
Accrued expenses 37,163 68,270
Deferred revenue 50,033 24,000
-------- --------
Total current liabilities 210,548 190,243
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, par value $1; 200 shares authorized and outstanding 200 200
Additional paid-in capital 1,350 6,650
Accumulated deficit (72,834) (10,417)
-------- --------
Total stockholders' deficit (71,284) (3,567)
-------- --------
TOTAL $139,264 $186,676
======== ========
</TABLE>
See notes to financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
THE GROWTH STRATEGY GROUP, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1998 AND 1999
AND NINE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 (UNAUDITED)
============================================================================================
NINE MONTHS ENDED
DECEMBER 31,
YEAR ENDED MARCH 31, 1998 1999
1998 1999 (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES $588,981 $1,269,567 $278,650 $768,954
OPERATING COSTS AND EXPENSES:
Salary and wages 231,030 574,329 70,253 296,965
Professional services and outsourcing 105,076 353,224 43,436 159,727
General and administrative 308,228 347,022 188,850 237,936
--------- ---------- -------- --------
TOTAL 644,334 1,274,575 302,539 694,628
(LOSS) INCOME FROM OPERATIONS (55,353) (5,008) (23,889) 74,326
OTHER INCOME (EXPENSE) (1,069) (11,304) (1,100) (11,909)
--------- ---------- -------- --------
NET INCOME (LOSS) $(56,422) $ (16,312) $(24,989) $ 62,417
======== ========== ======== ========
</TABLE>
See notes to financial statements
F-3
<PAGE>
THE GROWTH STRATEGY GROUP, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
YEARS ENDED MARCH 31, 1998 AND 1999
AND NINE MONTHS ENDED
DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AS OF APRIL 1, 1997 - - - -
Common stock issuance 200 200 (100) 100
Net loss 0 0 0 (56,422) (56,422)
-------- ------ ---------- ----------- --------
BALANCE AS OF MARCH 31, 1998 200 200 0 (56,522) (56,322)
Capital contribution for debt reduction
(Note 3) 1,350 1,350
Net loss 0 0 0 (16,312) (16,312)
-------- ------ ---------- ----------- --------
BALANCE AS OF MARCH 31, 1999 200 200 1,350 (72,834) (71,284)
Capital contribution for debt reduction
(Note 3) 0 0 5,300 0 5,300
Net income for the nine month period ended
December 31, 1999 (unaudited) 0 0 0 62,417 62,417
-------- ------ ---------- ----------- --------
BALANCE AS OF DECEMBER 31, 1999 (unaudited) 200 $200 $6,650 $(10,417) $ (3,567)
======== ====== ========== =========== ========
</TABLE>
See notes to financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
THE GROWTH STRATEGY GROUP, INC.
STATEMENT OF CASH FLOWS
YEARS ENDED MARCH 31, 1998 AND 1999
AND NINE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 (UNAUDITED)
========================================================================================================
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
1998 1999 1998 1999
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $(56,422) $(16,312) $(24,989) $ 62,417
Noncash items in net income:
Depreciation 1,357 3,777 1,018 1,836
Changes in operating working capital:
Accounts receivable (96,575) (17,351) (22,939) (53,075)
Prepaid expenses and other (4,687) 1,939 687 2,748
Accounts payable 38,537 47,165 57,712 (2,646)
Accrued expenses and other 81,480 5,716 (24,764) 5,074
-------- -------- -------- --------
Net cash provided by (used in) operating
activities (36,310) 24,934 (13,275) 16,354
INVESTING ACTIVITIES
Additions to property and equipment (6,787) (12,097) (6,447)
-------- -------- -------- --------
Net cash used in investing activities (6,787) (12,097) (6,447) -
FINANCING ACTIVITIES
(Repayments) proceeds from notes payable-net 117,000 (78,000) (325) (17,433)
Proceeds from issuance of common stock 100 -
-------- -------- -------- --------
Net cash provided by (used in) financing
activities 117,100 (78,000) (325) (17,433)
INCREASE (DECREASE) IN CASH 74,003 (65,163) (20,047) (1,079)
CASH, BEGINNING OF PERIOD 74,003 74,003 8,840
-------- -------- -------- --------
CASH, END OF PERIOD $ 74,003 $ 8,840 $ 53,956 $ 7,761
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURES:
Capital contribution for debt reduction
(Note 3) $ 1,350 $ 5,300
-------- --------
</TABLE>
See notes to financial statements
F-5
<PAGE>
THE GROWTH STRATEGY GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1998 AND 1999
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS DESCRIPTION - The Growth Strategy Group, Inc. ("Growth Strategy"), a
New York Corporation, was formed in April 1997. Growth Strategy is an
information technology consulting firm providing services primarily in New
York. Growth Strategy's primary focus is providing marketing and strategic
planning in the area of technology and information services.
REVENUES are generated primarily from providing customers with consulting
services and are recognized as services are rendered. Services which are paid
in advance or subject to refund are recorded as deferred revenue.
FINANCIAL STATEMENT PRESENTATION requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies at the date of the financial statements and the
reported amounts of revenues and expenses for the period. Differences from
those estimates are recognized in the period they become known.
PROPERTY AND EQUIPMENT is stated at cost less accumulated depreciation of
$5,134 at March 31, 1999. Depreciation and amortization are computed over the
estimated useful lives of the assets, primarily five years. Property
consisted of computer equipment and furniture and fixtures.
UNAUDITED INTERIM INFORMATION is provided for the nine-month periods ended
December 31, 1998 and 1999 and has been prepared on the same basis as the
audited annual financial statements. The information furnished reflects, in
the opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the results of the interim
period presented. The interim period results are not necessarily indicative
of the results that may be expected for the full year.
2. LINE OF CREDIT AND OTHER NOTES PAYABLE
Notes payable consist of the following at March 31, 1999:
Borrowings under revolving line of credit
under a $100,000 credit facility, bearing
interest at prime plus 1.25%(9.00% at
March 31, 1999) and collateralized by
accounts receivable $20,000
Notes payable to shareholder, non interest
bearing in 2000 17,650
-------
Total current debt $37,650
=======
3. CAPITAL STOCK
CAPITAL CONTRIBUTION - During March 1999, the two 50% shareholders of
Growth Strategy transferred 24 shares of common stock to an employee as a
payment of $1,350 on a $19,000 outstanding note payable of Growth Strategy
to this employee. In June 1999 an additional 66 shares of common stock
from one shareholder were transferred to this employee for payment of $5,300
of the outstanding note payable.
F-6
<PAGE>
4. LEASE COMMITMENTS
The Company has a month to month operating lease agreement for its corporate
office space in New York, New York, and several other operating leases for
various office equipment which expire at various dates through 2002. Rent
expenses totaled $54,976 and $12,848 for the years ended March 31, 1999 and
March 31, 1998 respectively. Future minimum lease payments under these
operating leases are as follows:
Fiscal year ending March 31:
2000 8,240
2001 6,860
2002 1,835
2003 0
2004 0
-------
Total minimum payments $16,935
=======
5. INCOME TAXES
At March 31, 1999, the Company had net operating loss ("NOL") carry forwards
totaling approximately $73,000, the tax benefit of which is offset by a
valuation allowance until realization is more likely than not. No provision
for income taxes has been made in the nine months ended December 31, 1999
(unaudited) based on the expected utilization of the NOLs.
6. CONCENTRATION OF CREDIT RISK
Financial instruments that are potentially subject to the concentration of
credit risk are accounts receivable. Growth Strategy performs ongoing credit
evaluations as to the financial condition of its customers. Two customers
made up approximately 23% and 11% of accounts receivable at March 31, 1999.
Three customers accounted for approximately 26% and 21% of total revenues
for the years ended March 31, 1999 and March 31, 1998 respectively. One
vendor accounted for approximately 26% of total accounts payable at March
31, 1999.
7. SUBSEQUENT EVENTS
On March 1, 2000, 100% of Growth Strategy's common stock outstanding was
purchased by EpicEdge, Inc. in exchange for EpicEdge, Inc. common stock and
cash.
F-7
<PAGE>
ANNEX B
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENT
The following unaudited pro forma consolidated balance sheet and statement of
operations of EpicEdge, Inc. (the "Company") as of and for the year ended
December 31, 1999, (the "Unaudited Pro Forma Consolidated Financial Statements")
give effect to the acquisition of The Growth Strategy Group, Inc. (the
"Acquisition") under the purchase method of accounting.
The unaudited pro forma balance sheet was prepared assuming that the Acquisition
was consummated as of December 31, 1999.
The unaudited pro forma consolidated statement of operations was prepared
assuming that the Acquisition and the acquisitions in 1999 were consummated at
the beginning of 1999.
The Unaudited Pro Forma Consolidated Financial Statements are based upon the
historical financial statements of the Company, which were previously filed on
Form 10-KSB/A and Growth Strategy, which are included elsewhere herein, for the
year ended March 31, 1998 and 1999 and should be read in conjunction with those
statements and notes thereto. The Unaudited Pro Forma Financial Statements may
not be indicative of the results that actually would have occurred if the
acquisition of Growth Strategy had been in effect on the dates indicated or of
future results of operations of the combined entities.
The pro forma adjustments and the resulting Unaudited Pro Forma Consolidated
Financial Statements have been prepared based upon information and certain
assumptions and estimates deemed appropriate by the Company. The Company's
management believes, however, that the pro forma adjustments and the underlying
assumptions and estimates reasonably present the significant effects of the
transaction reflected thereby and that any subsequent changes in the underlying
assumptions and estimates will not materially affect the Unaudited Pro Forma
Consolidated Financial Statements presented herein. The Unaudited Pro Forma
Consolidated Financial Statements do not purport to represent what the Company's
results of operations actually would have been had the transaction occurred on
the date indicated or to project the Company's financial position or results of
operations for any future date or period. Furthermore, the Unaudited Pro Forma
Consolidated Financial Statements do not reflect changes that may occur as the
result of post-transaction activities and other matters.
P-1
<PAGE>
EPICEDGE, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS HISTORICAL ADJUST
-------------------------- TO
EPICEDGE GROWTH PRO FORMA PRO FORMA
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,517,065 $ 7,761 $ (375,000) $ 1,149,826
Account receivable - trade, no allowance for doubtful accounts 4,551,736 167,001 4,718,737
Other assets 247,617 247,617
------------- -------- ---------- -----------
Total current assets 6,316,418 174,762 (375,000) 6,116,180
PROPERTY AND EQUIPMENT, NET 485,261 11,914 497,175
GOODWILL, net 8,508,128 6,500,007 15,008,135
DISCONTINUED OPERATIONS-Net assets 365,878 365,878
------------- -------- ---------- -----------
TOTAL ASSETS $15,675,685 $186,676 $6,125,007 $21,987,368
============= ======== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Line of credit and term note and other notes payable $ 3,241,471 14,917 $ 3,256,388
Accounts payable 5,096,439 83,056 5,179,495
Accrued expenses and other current liabilities 1,316,866 68,270 44,614 1,429,750
Deferred revenue 24,000 24,000
------------- -------- ---------- -----------
Total current liabilities 9,654,776 190,243 44,614 9,889,633
Shareholders' Equity (Deficit):
Common stock 230,815 200 2,570 233,585
Common stock warrants 115,000 115,000
Additional paid in capital 12,238,567 6,650 6,067,406 18,312,623
Accumulated deficit (6,563,473) (10,417) 10,417 (6,563,473)
------------- -------- ---------- -----------
Total shareholders' equity 6,020,909 (3,567) 6,080,393 12,097,735
------------- -------- ---------- -----------
TOTAL $15,675,685 $186,676 $6,125,007 $21,987,368
============= ======== ========== ===========
</TABLE>
P-2
<PAGE>
EPICEDGE, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
EPICEDGE GROWTH ADJUSTMENTS OPERATIONS
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 29,439,569 $1,086,346 $3,034,389 $ 33,560,304
Cost of operations 35,367,661 1,011,699 3,548,636 39,927,996
------------ ----------- ---------- ------------
(Loss) income from opertions $ (5,928,092) $ 74,647 $ (514,247) $ (6,367,692)
Other (expense) (9,284) (11,909) - (21,193)
------------ ----------- ---------- ------------
(Loss) income from continuing operations $ (5,937,376) $ 62,738 (514,247) (6,388,885)
============= ========== ========== ============
BASIC LOSS PER SHARE - BASIC AND DILUTED
CONTINUING OPERATIONS $ (0.28) $ (0.30)
============ ============
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING -
BASIC and DILUTED 21,370,431 277,000 21,647,431
</TABLE>
P-3
<PAGE>
EPICEDGE, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
1. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro forma
condensed combined financial statements, based on the acquisition of all
of the outstanding capital stock of Growth Strategy for approximately $6.5
million, which includes $375,000 in cash and approximately $45,000 in
acquisition expenses.
The unaudited pro forma combined condensed balance sheet as of December 31,
1999 gives effect to the acquisition as if it had occurred on December 31,
1999. The unaudited pro forma combined condensed statements of operations
for the year ended December 31, 1999 gives effect to the acquisition as if
it had occurred at January 1, 1999.
The following adjustments have been reflected in the unaudited pro forma
combined condensed financial statements:
a. Reflects the payment of cash to the shareholders of The Growth
Strategy Group, Inc. and the recording of the entries required under
the purchase method of accounting. Accordingly, the total purchase
price has been allocated to the tangible assets and liabilities of
Growth Strategy based on their relative fair values. This fair value
of the tangible assets and liabilities approximated their historical
book values at December 31, 1999. The amounts and components of the
purchase price, along with the allocation of the purchase price to the
net assets acquired and associated acquisition accruals is presented
below.
Purchase Price
Cash $ 375,000
Stock 6,076,826
Acquisition expenses 44,614
----------
$6,496,440
----------
Net Assets Acquired
Book value of net tangible assets of Growth Strategy $ (3,567)
Goodwill 6,500,007
----------
$6,496,440
----------
b. Reflects the adjustments to record the amortization of goodwill
resulting from the allocation of the purchase price. The pro forma
adjustment assumes goodwill will be amortized on a straight-line basis
over an estimated useful life of eight years. This determination of
the estimated useful life at the date of consummation of the
acquisition is based on the best information available at that date.
P-4
