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): November 10, 1999
STRATEGIA CORPORATION
(Exact name of registrant as specified in its charter)
Kentucky 0-21662 61-1064606
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
P. O. Box 37144
Louisville, Kentucky 40233-7144
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502) 426-3434
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets
On August 10, 1999, Strategia Corporation ("Strategia") entered into a
definitive agreement to sell its French subsidiaries to a subsidiary of
Guardian iT plc ("Guardian"), a United Kingdom based disaster recovery
company. The transaction was approved by a majority vote of the shareholders
at a meeting of the shareholders on November 4, 1999. On November 10, 1999,
the Company completed the sale of its French subsidiaries to Guardian. The
final purchase price is subject to a determination of the net asset value of
the combined balance sheets of the French subsidiaries as of the November 10,
1999, closing date. Based upon the September 30, 1999, combined balance
sheets of the French subsidiaries, proceeds to the Company, net of costs and
purchase of minority interests, are estimated to be $6.9 million, of which
$1.275 million has been placed in escrow pursuant to warranties provided by the
Company. Subject to deductions, $637.5 thousand will be released from the
escrow account on March 31, 2000 and the remaining $637.5 thousand on
September 30, 2000. It is anticipated that a net gain of approximately $4.0
million will result from the transaction.
The Company disposed of its investment in its three French subsidiaries by
selling the shares of stock owned in each company. The three subsidiaries
were Twinsys Dataguard S.A. ("Twinsys"), Twin-X S.A. ("Twin-X"), and Strategia
Europe S.A.S. ("Strategia Europe"). These three companies comprise the
entirety of the Company's international business segment. Twinsys provided
disaster recovery and contingency planning services to users of Bull computers.
Twin-X provided similar services to users of Unix-based computer systems.
Strategia Europe provided Year 2000 Services in France. Twinsys and Strategia
Europe were 100% owned by the Company and Twin-X was 60% owned by Twinsys. As
part of the transaction, the Company acquired the shares of Twin-X held by the
minority shareholders prior to the completion of the sale transaction. The
minority shareholders were the two senior managers of the French subsidiaries,
one also being an officer of the Company, and their spouses. The Company, in
turn, sold those shares to Guardian in order that Guardian could acquire 100%
of the three subsidiaries in one transaction. The assets of three French
subsidiaries included receivables, computers and related equipment, and other
miscellaneous operating assets used in the businesses.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of business acquired.
Not applicable.
(b) Pro Forma Financial Information.
The following tables present the Company's consolidated income statements for
the year ended December 31, 1998, and the nine months ended September 30, 1999
and the consolidated balance sheet as of September 30, 1999, on both an actual
and pro forma basis. Notes to the Pro forma Financial Statements follow
describing the adjustments made to the actual financial statements to arrive
at the pro forma financial statements. (Amounts are in thousands, except per
share amounts.)
<TABLE>
Income Statement
<CAPTION> Year ended December 31, 1998 9 months ended September 30, 1999
Actual Adjustments Pro forma Actual Adjustments Pro forma
<S> <C> <C> <C> <C> <C> <C>
Service
revenues $11,941.5 $- $11,941.5 $9,446.1 $- $9,446.1
--------- ------- --------- -------- ------- --------
Operating
expenses:
Cost of
Services 8,471.6 - 8,471.6 5,426.7 - 5,426.7
Selling,
general
and
admin. 4,861.6 - 4,861.6 2,775.3 - 2,775.3
Other
Charges 440.1 - 440.1 333.6 - 333.6
--------- ------- --------- -------- ------- --------
13,773.3 - 13,773.3 8,535.6 - 5,694.1
--------- ------- --------- -------- ------- --------
Operating
income
(loss) (1,831.8) - (1,831.8) 910.5 - 910.5
Other
(income)
expense:
Interest
expense 148.2 - 148.2 104.6 - 104.6
Other
(income),
net (72.8) - (72.8) (18.4) - (18.4)
--------- ------- --------- -------- ------- --------
75.4 - 75.4 86.2 - 86.2
--------- ------- --------- -------- ------- --------
Income
(loss)
before
income
taxes (1,907.2) - (1,907.2) 824.3 - 824.3
Provision for
income taxes 19.8 - 19.8 14.2 - 14.2
--------- ------- --------- -------- ------- --------
Income (loss)
from
continuing
operations $(1,927.0) $ - $(1,927.0) $ 810.1 $ - $ 810.1
--------- ------- --------- -------- ------- --------
--------- ------- --------- -------- ------- --------
Income
(loss) per
share from
continuing
operations $(0.41) $(0.41) $.17 $.17
Weighted
average
shares
outstanding 4,667.7 4,667.7 4,667.7 4,667.7
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet
September 30, 1999
Actual Adjustments Pro forma
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,985.5 $ 6,038.0 $ 8,023.5
Accounts receivable, net 4,379.4 (2,644.1) 1,735.3
Unbilled revenues 2,341.1 (1,850.1) 491.0
Other current assets 386.3 (137.8) 248.5
---------- ---------- ----------
Total current assets 9,092.3 1,406.0 10,498.3
---------- ---------- ----------
Property and equipment
Cost 20,909.4 (8,725.4) 12,184.0
Accumulated depreciation 16,750.1 (7,426.9) 9,323.2
---------- ---------- ----------
4,159.3 (1,298.5) 2,860.8
---------- ---------- ----------
Other assets 304.1 (191.8) 112.3
---------- ---------- ----------
$ 13,555.7 $ (84.3) $ 13,471.4
---------- ---------- ----------
---------- ---------- ----------
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of
long-term debt 58.2 - 58.2
Current installments of
obligations under capital leases 311.1 (162.9) 148.2
Deferred revenue 21.5 - 21.5
Accounts payable 983.4 (659.2) 324.2
Accrued expenses and
other liabilities 3,055.2 (1,878.4) 1,176.8
Accrued income taxes 200.1 (214.5) (14.4)
---------- ---------- ----------
Total current liabilities 4,629.5 (2,915.0) 1,714.5
Long-term debt, excluding
current installments 837.4 - 837.4
Obligations under capital leases,
excluding current installments 36.4 (31.5) 4.9
Deferred revenue 1,147.7 (1,147.7) -
Deferred income taxes 74.9 (74.9) -
Minority interest 189.4 (189.4) -
---------- ---------- ----------
Total liabilities 6,915.3 (4,358.5) 2,556.8
---------- ---------- ----------
Stockholders' equity:
Common stock without par value 13,884.0 - 13,884.0
Accumulated deficit (7,041.6) 4,072.2 (2,969.4)
Accumulated other comprehensive
income (loss) (202.0) 202.0 -
---------- ---------- ----------
Total stockholders' equity 6,640.4 4,274.2 10,914.6
---------- ---------- ----------
$ 13,555.7 $ (84.3) $ 13,471.4
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Notes to Pro forma Financial Statements:
1. Results of operations of the French subsidiaries are reported as
discontinued operations in the actual results included in the Company's
September 30, 1999, Form 10-QSB. Revenues, pretax income (loss) and net
income (loss) for the discontinued segment for the year ended December 31,
1998, and the nine months ended September 30, 1999, and the composition of
net assets of the discontinued segment are shown below:
<TABLE>
<CAPTION>
Year ended Nine Months ended
December 31, 1998 September 30, 1999
<S> <C> <C>
Revenues $9,680.0 $9,725.0
-------- --------
Income (loss) before
Income taxes (374.2) 859.8
Income tax provision 112.4 201.8
-------- --------
Net income (loss)
from operations $ (486.6) $ 658.0
-------- --------
-------- --------
Current assets $3,381.1 $5,549.5
Current liabilities 2,396.7 2,915.0
-------- --------
Working capital 984.4 2,634.5
Fixed Assets 2,534.2 1,298.5
Other non-current assets 300.5 247.6
Non-current liabilities (1,593.0) (1,443.5)
-------- --------
Net assets $2,226.1 $2,737.1
-------- --------
-------- --------
</TABLE>
2. Pro forma income statement adjustments comprise the combined operating
results of the French subsidiaries after eliminating intercompany management
fees and intercompany interest charged the French subsidiaries on intercompany
borrowings.
3. Pro forma balance sheet adjustments at September 30, 1999, comprise the
following:
i. Net proceeds of $6.9 million after purchase of minority interests in
Twin-X for approximately $1.1 million and legal and other professional
fees of approximately $568 thousand.
ii. Net gain of approximately $4.0 million.
4. No interest income has been included in the pro forma income statement
from any assumed investment of the net proceeds.
5. No income tax provision has been included in calculating the net gain
included in the September 30, 1999, pro forma balance sheet. The Company had
approximately $8.1 million in U.S. net tax operating loss carryforwards at
December 31, 1998, and it is assumed that there would be no Federal and/or
state income taxes resulting from the transaction.
6. Although $1.275 million in proceeds will initially be put into an escrow
account, the above pro forma results assume 100% of the $1.275 million is
included in the pro forma balance sheet. The Company knows of no items that
would require payment to the purchaser for Relevant Claims.
(c) Exhibits
Exhibit 99.1 - Press Release dated November 10, 1999.
SIGNATURES
In accordance with 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.
STRATEGIA CORPORATION
November 23, 1999 /s/ Richard W. Smith
Date Richard W. Smith
President
Exhibit 99.1
Strategia Corporation Announces Completion of Sale of French Subsidiaries
November 10, 1999 - Louisville, KY - Strategia Corporation (SAA:AMEX) today
announced that it has completed the sale of its French subsidiaries to Guardian
iT plc. The final purchase price is subject to a determination of the net
asset value of the combined balance sheets of the French subsidiaries as of the
November 10, 1999, closing date. Based upon the September 30, 1999, combined
balance sheets of the French subsidiaries, proceeds to the Company, net of
costs and purchase of minority interests, are estimated to be $6.9 million, of
which $1.275 million will be placed in escrow pursuant to warranties provided
by the Company. It is anticipated that a net gain of approximately $4.0
million will result from the transaction.
This release includes forward looking statements, including the statements
regarding estimated net sales proceeds. Management cautions that these
forward looking statements are necessarily subject to risks, uncertainties,
and events that may be beyond the control of Strategia. Factors that could
affect the sales proceeds realized by the Company includes uncertainties
regarding asset valuations, unknown claims and contingencies that may affect
the release of the escrowed funds, and unanticipated costs to complete Year
2000 service contracts of one the French subsidiaries. No assurance can be
given that anticipated results will be achieved.
Contact: Murdock Capital Partners Corp.
(212) 421-2545
Thomas M. Dean
Luis J. Mejia
