SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NUMBER 1 TO
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 27, 1996
DeNovo Corporation
(Exact name of registrant as specified in its charter)
Ontario, Canada 0-16355 98-0082860
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
214 Brazilian Ave., Suite 400, Palm Beach, FL 33480
(Address of principal executive offices) (Zip Code)
(561) 659-0121
Registrant's telephone number, including area code
---
(Former name or former address, if changed since last report.)
Total Number of Pages: 10
Exhibit Index appears on page: 3
Item 5. Other Events.
On May 9, 1996, the Nasdaq Department of Market Services ("Nasdaq") issued
a letter to DeNovo Corporation (the "Company") setting forth the Company's
alleged failure to comply with the continued listing minimum bid price
requirement for its common stock or the alternative minimum capital and surplus
and public float requirements. The minimum bid price requirement is $1.00 per
share; the alternative capital and surplus and public float requirements are a
minimum of $2,000,000 capital and surplus, and a minimum market value of the
public float of $1,000,000. The letter stated that the Company must demonstrate
compliance with either of these requirements on or before August 6, 1996, or
submit to the Nasdaq by that date its proposal(s) for achieving compliance.
The Company filed a Form 8-K dated August 5, 1996 which it believed
evidenced compliance with the alternative capital and surplus requirement as of
June 30, 1996 using certain revenue figures for the month of July which were
estimated. Nasdaq issued a letter on August 16, 1996 disagreeing with the
Company's assessment and stating that it intended to delist the Company's Common
Stock on August 23, 1996 in part because the results of operations reflected in
the August 5, 1996 Form 8-K reflected projected operations for the month of
July, 1996. The Company then filed a notice of appeal of Nasdaq's decision. A
hearing was held regarding the issue at the Nasdaq on September 12, 1996.
Subsequent to the hearing, the Nasdaq granted the Company an exception which
requires the Company to make a public filing with the Securities and Exchange
Commission and Nasdaq on or before September 30, 1996. The filing must contain
an August 31, 1996 statement of operations and a corresponding balance sheet
with pro forma adjustments to reflect any subsequent, significant events. The
filing must also evidence compliance with all Nasdaq criteria necessary for
continued inclusion under the alternative capital and surplus and market float
rule. This Form 8-K is being filed to meet the foregoing requirements pursuant
to said exception. The other requirements of the exception have been met by the
Company's issuing and providing to the Nasdaq a press release describing the
conditional listing and the Company's providing to the Nasdaq a copy of its
definitive proxy materials filed with the SEC.
The market value of the Company's public float as of September 26, 1996
was $5,176,680. This figure was calculated by multiplying the number of shares
in the public float, 15,059,432, times the closing bid price of $0.34375. The
number of shares in the public float is the total number of issued and
outstanding shares less certain shares held by insiders.
In the hearing with the Nasdaq, the Company outlined its procedures in
process to go forward with a 1 for 20 reverse split of shares of common stock as
part of its long term plan to achieve compliance with the $1 per share minimum
bid requirement. The Company noted that a proxy for shareholder approval of the
reverse split has already been filed with the SEC. In its letter following the
hearing which granted the exception subject to compliance with requirements
detailed herein, the Nasdaq responded that "the reverse split would be a
positive step toward ensuring long term compliance."
Attached as part of this Form 8-K and incorporated herein by reference is
the DeNovo Corporation and Subsidiaries Unaudited Pro Forma Consolidated Balance
Sheet as of August 31, 1996 (the "Balance Sheet") and the related Unaudited
Consolidated Income Statement and Unaudited Pro Forma Consolidated Statement of
Changes of Shareholders' Equity for the eight months then ended. Such Balance
Sheet sets forth historic balance sheet data as of August 31, 1996 and pro forma
transactions and adjustments thereto. The financial statements include actual
consolidated results of operations of the Company and its subsidiaries for the
eight months ended August 31, 1996, as well as results of the consummation of
the Company's purchase of substantially all of the assets and operations of
Dugent Publishing Corp., which occurred on September 6, 1996.
This information is provided solely for the purpose of complying with the
requirements delineated by the Nasdaq pursuant to the exception recently granted
to the Company. This information is not intended to be used by the investing
public. Insofar as the Company has not provided comparable balance sheet and
pro forma information as of August 31, 1995, the information is of limited use
to the investing public.
This Amendment is being filed in order to (a) reduce by $1,000,000 each of
the amounts shown for Other assets, Total Assets, Current liabilities, and Total
Liabilities and Shareholders' Equity contained in the Unaudited Pro Forma
Consolidated Balance Sheet filed as part of the Company's Form 8-K on September
27, 1996 and (b) correct Note 1 included therein. In the original filing, the
Company should have reclassified the $1,000,000 deposit it had paid in July
on the Dugent Publishing Corp. acquisition to the assets purchased, and should
have reclassified the $1,000,000 loan into Series E Preferred Shares. The
reclassification does not affect net equity or net income presented in the
original filing.
Item 7. Financial Statements and Exhibits.
The following financial statements and exhibits are filed as a part of
this report:
(b) Pro Forma Financial Statements.
Unaudited Pro Forma Consolidated Balance Sheet
Unaudited Pro Forma Consolidated Income Statement
Unaudited Pro Forma Consolidated Statement of Changes in Shareholders' Equity
Notes to Unaudited Pro Forma Consolidated Balance Sheet
(c) Exhibits.
Exhibit 99.1 Letter from Nasdaq Stock Market, Inc. to the Company
dated September 18, 1996.
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.
DeNovo Corporation
Date: October 3, 1996 By: /s/ Michael D. Herman
Michael D. Herman, President
EXHIBIT INDEX
99.1 Letter from Nasdaq Stock Market, Inc. dated September 18, 1996 Page 8
<TABLE>
DeNovo Corporation and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
August 31, 1996
<S> <C> <C> <C>
ASSETS
Pro Forma
Actual Transactions & Pro Forma
as of Adjustments as of
August 31, 1996 Dr. (Cr.) August 31, 1996
Current assets $ 1,671,290 $ 677,003 $ 2,348,293
Property, plant and equipment, net 1,746,050 75,000 1,821,050
Other assets 6,378,648 6,247,997
(1,000,000) 11,626,645
TOTAL ASSETS $ 9,795,988 $ 6,000,000 $ 15,795,988
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 1,905,690 $ 1,000,000 $ 905,690
Notes payable 5,000,000 (4,000,000) 9,000,000
SHAREHOLDERS' EQUITY
Series A Preference Shares 28,923 28,923
Series C Preference Shares 739,696 739,696
Series D Preference Shares - (1,200,000) 1,200,000
Series E Preference Shares - (1,800,000) 1,800,000
Common stock 7,780,570 7,780,570
Accumulated deficit (5,658,891) (5,658,891)
TOTAL SHAREHOLDERS' EQUITY 2,890,298 (3,000,000) 5,890,298
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 9,795,988 $ (6,000,000) $ 15,795,988
See accompanying notes to financial statements.
</TABLE>
<TABLE>
DeNovo Corporation and Subsidiaries
Unaudited Consolidated Pro Forma Income Statement
For the Eight Months Ended August 31, 1996
<S> <C> <C> <C>
Pro Forma
Transactions & Pro Forma
Actual Adjustments as of
August 31, 1996 Dr. (Cr.) August 31, 1996
Net sales $ 3,699,455 $ $ 3,699,455
Cost of sales 1,878,802 1,878,802
Gross profit 1,820,653 1,820,653
Operating expenses 1,114,560 1,114,560
Non-recurring operating expenses 295,048 295,048
Income from operations 411,045 411,045
Other income (expense):
Gain on disposition of subsidiary 415,257 415,257
Interest and other expense (525,676) (525,676)
Total other income (expense) (110,419) (110,419)
Income before taxes 300,626 300,626
Provision for income taxes - -
Net income $ 300,626 $ $ 300,626
See accompanying notes to financial statements.
</TABLE>
<TABLE>
DeNovo Corporation and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Changes in Shareholders' Equity
For the Eight Months Ended August 31, 1996
Unaudited
Pro Forma
Preferred Stock Preferred Stock Preferred Stock
Series A Series C Series D and E Common Stock Net
Shares Amount Shares Amount Shares Amount Shares Amount Deficit Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
as of
Jan. 1, 1996 32,500 $28,923 1,100,000 $ 739,696 - $ - 4,449,421 $4,258,755 $(5,959,517) $ (932,143)
Issuance of
Common Stock - - - - - - 11,552,509 $3,521,815 - 3,521,815
Issuance of
Series D
Pref'd Stock - - - - 1,200 1,200,000 - - - 1,200,000
Issuance of
Series E
Pref'd Stock - - - - 1,800 1,800,000 - - - 1,800,000
Net Income - - - - - - - - 300,626 300,626
Pro Forma
Balance
as of
Aug.31, 1996 32,500 $28,923 1,100,000 $ 739,696 3,000 $3,000,000 16,001,930 $7,780,570 $(5,658,891) $5,890,298
See accompanying notes to financial statements.
</TABLE>
DeNovo Corporation and Subsidiaries
Notes to Unaudited Pro Forma Consolidated Balance Sheet
1. Unaudited Pro Forma Transaction
The Unaudited Pro Forma Consolidated Balance Sheet of DeNovo Corporation and
Subsidiaries reflects the following transaction.
On September 6, 1996, DeNovo Corporation purchased substantially all of the
assets and operations of Dugent Publishing Corporation. The following entry
adjusts the actual consolidated balance sheet amounts as of August 31, 1996, to
include the effect of the acquisition of the Dugent assets and operations as if
the transaction had occurred on August 31, 1996.
The adjustment included in the unaudited pro forma consolidated balance sheet is
as follows:
(1) To record the purchase of substantially all of the assets and
operations of Dugent Publishing Corporation.
<TABLE>
<S> <C> <C>
DR. CR.
Current assets (accounts receivable) $ 677,003 $
Equipment 75,000
Other assets (trademarks and copyrights) 6,247,997
Current liabilities (loan) 1,000,000
Notes payable 4,000,000
Other assets (deposit) 1,000,000
Series D preferred shares 1,200,000
Series E preferred shares 1,800,000
$ 8,000,000 $ 8,000,000
</TABLE>
2. Provision for Income Taxes
There is no provision for income taxes in the consolidated income statement
because DeNovo Corporation has substantial net operating losses available for
income tax purposes to offset gain on sale of its wholly owned subsidiary,
Teleconcepts, Inc. ("TCI"). TCI was in the retail telephone business and DeNovo
is now entirely in the publishing industry. Under IRS regulations, income
related to the disposition of the telephone business may be offset by the net
operating losses of that business, but income generated under the new business
would be taxable. As of August 31, 1996 the gain on sale of subsidiary portion
of income exceeds consolidated net income; accordingly, no provision for income
tax is provided for the eight months ended August 31, 1996.
3. Non-recurring operating expenses
Non-recurring operating expenses consist of professional fees and related
acquisition costs associated with the $7 million acquisition detailed herein and
another acquisition on March 29, 1996, of $7 million consisting of the assets
and operations of another acquired business.
THE NASDAQ STOCK MARKET, INC. NASDAQ
DAVID A. DON0HOE, JR.
COUNSEL
September 18, 1996
Ralph V. De Martino
De Martino, Finklestein, Rosen & Virga
1818 N Street, NW
Suite 400
Washington, DC 33480
Re: DeNovo Corporation
Nasdaq Listing Qualifications Panel
Decision NQ 1366C-96
Dear Mr. De Martino:
This is to inform you that, pursuant to the September 12, 1996 hearing before a
Nasdaq Listing Qualifications Panel (the "Panel"), a determination has been made
in the matter of DeNovo Corporation (the "Company") and its request for
continued Listing on The Nasdaq SmallCap Market(SM) pursuant to an exception to
the bid price requirement, as set forth in NASD Rule 4310(c)(04).
After a careful review of the record, the Company's submissions, and its oral
representations, the Panel made the following findings. The Company recently
acquired Dugent Publishing Corporation for $7 million of which $3 million was
cash and $4 million was debt. The Company also recently disposed of all of its
stock in an unprofitable, wholly owned subsidiary called Teleconcepts, Inc.
This transaction resulted in an increase in capital and surplus of $577,546. As
a result of these two transactions, management estimates that capital and
surplus and total assets will be approximately $6,014,700 and $15,612,289,
respectively, as of September 30, 1996. Management further represented that the
Company is now profitable and that it expects net income of approximately
$500,000 per quarter for the next 12 months, and upon absorption of all merger
costs, annual net income of $3 million to $5 million going forward.
There are currently approximately 15 million shares outstanding with
approximately 14.6 million in the public float. The closing bid price on
September 18 was $.3125/share. The Company argues that it now meets the
alternative minimum bid price requirement. However, it plans to go forward with
a 1 for 20 reverse split. A proxy for shareholder approval of the reverse split
has already been filed with the SEC.
The Panel was of the opinion that the Company may now be in compliance with the
alternative bid price requirement. The Panel was further of the opinion that
the reverse split would be a positive step toward ensuring long term compliance.
Despite the Company's projections of profitability, the Panel was concerned by
the Company's history of losses. Accordingly, the Panel determined to grant the
following exception.
The Company must make a public filing with the SEC and Nasdaq on or before
September 30, 1996. The filing must contain an August 31, 1996 statement of
operations and a corresponding balance sheet with pro forma adjustments to
reflect any subsequent, significant events. The filing must evidence capital
and surplus of $4,000,000 and compliance with all other criteria necessary for
continued inclusion. The Company must also provide the Hearings Department with
a copy of the proxy that has been filed with the SEC on or before September 30,
1996. In the event the Company fails to comply with any of the terms of this
exception, its securities will be immediately deleted from The Nasdaq Stock
Market(SM).
It is a requirement during the exception period that the Company must provide
prompt notification of any significant events which occur during this time.
Should there be a material change in the company's financial or operational
character the Panel reserves the right to reconsider the terms of this
exception. In addition, any compliance document will be subject to review by
the Panel, which may at its discretion request additional information before
approving the Company's compliance. At such time as the Hearings Department is
in receipt of the required press release and the Panel has confirmed acceptance
of the Company's compliance document(s), the company will be considered to have
demonstrated compliance with the terms of its exception.
All companies operating under exceptions are required to issue a press release
announcing the conditional listing on The Nasdaq SmallCap Market and are
identified by a fifth character "C" appended to the company's symbol.
Accordingly, effective September 20, 1996 the trading symbol of the company's
securities will be changed from DNVOF to DNVFC. When the Hearings Department is
in receipt of the required press release and the Panel has confirmed acceptance
of the SEC document(s) which demonstrates compliance, the "C" will be removed
from your symbol.
The Company should be aware that the Nasdaq Listing and Hearing Review Committee
("Review Committee") may, on its own motion, determine to review any
Qualifications Panel decision within 45 calendar days after issuance of the
written decision. If the Review Committee determines to review this decision it
may affirm, modify, reverse, dismiss, or remand the decision to the
Qualifications Panel. You will be notified immediately in the event the Review
Committee determines that this matter will be called for review.
The Company may also request the Review Committee to review this decision. Your
request for review should be made in writing within 15 days from the date of
issuance of this decision, to: Sara Nelson Bloom, Office of General Counsel, The
Nasdaq Stock Market, 1735 K Street, N.W., Washington, DC 20006, (202) 728-8478.
Please be advised that the institution of a review, whether by way of your
request, or on the initiative of the Review Committee, will not operate as a
stay of this decision.
If you have any questions, please do not hesitate to contact me at (202) 496-
2529.
Sincerely,
/s/ David A. Donohoe, Jr.
David A. Donohoe, Jr.
Counsel
Listing Qualifications Hearings
