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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES ACT OF 1934
---------------
OCTOBER 4, 2000
Date of Report (Date of earliest event reported)
---------------
PACIFICNET.COM, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 000-24985 11-2854355
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
7808 CREEKRIDGE CIRCLE, SUITE 1010, BLOOMINGTON, MN 55439
(Address of Principal Executive Offices)
(952) 829-5888
(Registrant's Telephone Number)
CREATIVE MASTER INTERNATIONAL, INC., 18 BEDFORD RD., CASEY IND. BLDG.,
8TH FLOOR,
TAIKOKTSUI, KOWLOON, HONG KONG
(Former Name and Address)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 17, 2000, PacificNet.com, Inc. (the "Company") completed
the sale of its die-cast replica business previously operated under the
Creative Master name (the "Creative Master Business"). A copy of the
Company's press release announcing the sale is included as an exhibit to this
Report and incorporated herein by reference.
The sale of the Creative Master Business was accomplished pursuant to
a Share Sale and Purchase Agreement, dated September 30, 2000 (the
"Agreement"), among the Company and Acma Strategic Holdings Ltd., Acma
Investments Pte Limited, Superego, Inc., and Carl Tong Ka Wing (collectively,
the "Purchasers"). A copy of the Agreement, as well as a Supplemental
Agreement among the Company and the Purchasers, is filed as an exhibit to
this Report. Under the Agreement, the Company transferred to the Purchasers'
designee all of the capital stock of Creative Master Limited, a wholly owned
Hong Kong subsidiary of the Company which operated the Creative Master
Business, in consideration for the Purchasers' surrender to the Company of a
total of 895,765 shares of the Company's common stock held by the Purchasers.
In connection with the Agreement, the Purchasers also assumed all
indebtedness of the Company related to the Creative Master Business and
Creative Master Limited relinquished any claim with respect to an
intercompany balance of US$1,492,307 owing from the Company. The Company
shares surrendered by the Purchasers had a market value of approximately $4.9
million based on the last sale price of the common stock as reported on the
Nasdaq National Market on October 3, 2000. At present, the Company intends to
hold the surrendered shares in treasury.
Mr. Tong, one of the Purchasers, and Leo Kwok Sheck Pui, the beneficial
owner of Superego, Inc., another of the Purchasers, were the original founders
of the Creative Master Business. Mr. Tong also was a director and the Chief
Executive Officer of the Company prior to its acquisition by the former owners
of PacificNet.com, LLC in July of this year.
Prior to July of this year, the Creative Master Business constituted all
of the business of the Company. Since July, the Company has focused on its
business-to-business electronic commerce services and solutions, with an
emphasis on Asian businesses and trans-Pacific business-to-business trade. See
Item 7 of this Report for certain pro forma financial information reflecting the
disposition of the Creative Master Business.
2
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Following is the pro forma financial information required by
this item.
1. UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
On July 27, 2000, in exchange for all the ownership interests in PacificNet.com
LLC ("PacificNet"), PacificNet.com, the Registrant ("the Company") (formerly
Creative Master International, Inc.), issued 7,166,666 shares of its Common
Stock to the former owners of PacificNet.com LLC, which represented in excess of
80% of the total number of shares outstanding immediately following the
acquisition. These shares have not been registered for resale under the
Securities Act of 1933. The acquisition of PacificNet.com LLC was accounted for
as a purchase and treated as a reverse acquisition since the former owners of
PacificNet controlled over 80% of the total shares of Common Stock of the
Company outstanding immediately following the acquisition on July 27, 2000. In
connection with the acquisition of PacificNet.com LLC, the Company's name was
changed to "PacificNet.com, Inc." in order to reflect the primary business focus
of the Company following the acquisition. The unaudited pro forma condensed
combined financial statements of PacificNet.com LLC and Creative Master
International, Inc. have been filed with the Commission as part of
PacificNet.com's Quarterly Report on Form 10-Q dated August 14, 2000 and are
incorporated herein by reference. Refer also to the Company's filing with the
Commission on Form 8-K dated August 11, 2000 and Form 8-K/A dated October 6,
2000.
On October 2, 2000, the Company sold its die-cast replica manufacturing business
("the Creative Master Business") to a management group led by Mr. Carl Tong,
former Chief Executive Officer of Creative Master International Inc. The
Creative Master Business was acquired as part of the reverse-merger transaction
that was completed on July 27, 2000. As consideration for this business, the
management group returned 895,765 shares of PacificNet common stock. These
shares, presently held as treasury stock, represent a 10.14% reduction in the
total number of shares outstanding. Moreover, the management group also assumed
all liabilities and obligations relating to the Creative Master Business.
The following Unaudited Pro Forma Condensed Financial Statements give effect to
the disposition of the Creative Master Business, including the pro forma
adjustments described in the accompanying notes as though the disposition had
occurred on January 1, 2000. The Unaudited Pro Forma Condensed Balance Sheet as
of June 30, 2000, is presented to give effect to the disposition as if it
occurred on that date. The Unaudited Pro Forma Condensed Statement of Operations
for the six-month period ended June 30, 2000 gives effect to the disposition of
the Creative Master Business based on the assumptions and adjustments described
in the accompanying notes, as though the disposition had occurred on January 1,
2000.
The pro forma financial information does not purport to be indicative of the
results that would have been reported if the operations and management of the
Creative Master Business had been disposed of at the beginning of the period
presented, nor is it indicative of future results.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Pro Forma Creative
Combined Master NOTES PRO FORMA Pro Forma
Company(1) Business(2) ADJUSTMENTS Company
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
-------------------------------------------------------------------------------------------------
Cash and bank deposits $9,616 $1,577 $ - $8,039
-------------------------------------------------------------------------------------------------
Accounts receivable, net 6,232 5,158 - 1,074
-------------------------------------------------------------------------------------------------
Inventories, net 5,359 5,359 - -
-------------------------------------------------------------------------------------------------
Deposits and prepayments 2,135 1,936 - 199
-------------------------------------------------------------------------------------------------
Total current assets 23,342 14,030 - 9,312
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Long-term investments 2,706 - - 2,706
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Machinery, equipment and capital 10,271 9,895 - 376
leases, net
-------------------------------------------------------------------------------------------------
Goodwill and purchased 9,061 8,661 - 400
intangibles, net
-------------------------------------------------------------------------------------------------
Total Assets $45,380 $32,586 $ - $12,794
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
LIABILITIES, MINORITY INTERESTS
AND STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------
Short-term borrowings $2,440 $2,240 $ - $200
-------------------------------------------------------------------------------------------------
Capital lease obligations, current 392 392 - -
portion
-------------------------------------------------------------------------------------------------
Accounts payable 4,331 4,180 - 151
-------------------------------------------------------------------------------------------------
Other accrued expenses 4,071 3,738 - 333
-------------------------------------------------------------------------------------------------
Total current liabilities 11,234 10,550 684
-------------------------------------------------------------------------------------------------
Capital lease obligations, 316 316 - -
non-current
-------------------------------------------------------------------------------------------------
Loans from directors 120 120 - -
-------------------------------------------------------------------------------------------------
Deferred taxes 430 430 - -
-------------------------------------------------------------------------------------------------
Minority Interests 1,279 1,279 - -
-------------------------------------------------------------------------------------------------
Stockholders' Equity 32,001 19,891 (a) - 12,110
-------------------------------------------------------------------------------------------------
Total Liabilities, Minority $45,380 $32,586 $ - $12,794
Interests and Stockholders' Equity
-------------------------------------------------------------------------------------------------
</TABLE>
(1) The Pro Forma Combined Company reflects the unaudited pro forma combined
condensed financial statements of Creative Master International, Inc. and
PacificNet.com LLC as filed with the Commission as part of PacificNet.com's
Quarterly Report on Form 10-Q dated August 14, 2000. Refer also to the
Company's filing with the Commission on Form 8-K dated August 11, 2000 and
Form 8-K/A dated October 6, 2000.
(2) Reflects the historical unaudited financial statements of Creative Master
International, Inc. adjusted for the allocation of purchase price,
principally to goodwill.
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
4
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Pro Forma Creative
Combined Master PROFORMA Pro Forma
Company(1) Business(2) NOTES ADJUSTMENTS Company
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $19,420 $18,102 $ - $1,318
--------------------------------------------------------------------------------------------
Cost of goods sold (14,884) (14,600) - (284)
--------------------------------------------------------------------------------------------
Gross profit 4,536 3,502 - 1,034
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Selling, general and (5,310) (3,583) - (1,727)
administrative expenses
--------------------------------------------------------------------------------------------
Amortization of goodwill (433) (433) - -
--------------------------------------------------------------------------------------------
Loss from operations (1,207) (514) - (693)
--------------------------------------------------------------------------------------------
Interest and other 126 16 - 110
income, net
--------------------------------------------------------------------------------------------
Loss before income taxes (1,081) (498) - (583)
and minority interests
--------------------------------------------------------------------------------------------
Provision for income taxes (1) (1) - -
--------------------------------------------------------------------------------------------
Minority interests (272) (272) - -
--------------------------------------------------------------------------------------------
Net loss $(1,354) $(771) $ - $(583)
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Basic and diluted loss $(.15) - $(.07)
per common share
--------------------------------------------------------------------------------------------
Average number of shares 8,833 - (b) (895) 7,938
outstanding for basic and
diluted earnings per share
--------------------------------------------------------------------------------------------
</TABLE>
(1) The Pro Forma Combined Company reflects the unaudited pro forma combined
condensed financial statements of Creative Master International, Inc. and
PacificNet.com LLC as filed with the Commission as part of PacificNet.com's
Quarterly Report on Form 10-Q dated August 14, 2000. Refer also to the
Company's filing with the Commission on Form 8-K dated August 11, 2000 and
Form 8-K/A dated October 6, 2000.
(2) Reflects the historical unaudited financial statements of Creative Master
International, Inc. adjusted for the allocation of purchase price,
principally to goodwill.
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
5
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRO FORMA PRESENTATION
On October 2, 2000, the Company sold its die-cast replica manufacturing business
("the Creative Master Business") to a management group led by Mr. Carl Tong,
former Chief Executive Officer of Creative Master International Inc. The
Creative Master Business was acquired as part of a reverse-merger transaction
that was completed on July 27, 2000. The unaudited pro forma condensed combined
financial statements of PacificNet.com LLC and Creative Master International,
Inc. ("Pro Forma Combined Company") have been filed with the Commission as part
of PacificNet.com's Quarterly Report on Form 10-Q dated August 14, 2000 and are
incorporated herein by reference.
As consideration for the Creative Master Business, the management group returned
895,765 shares of Company common stock. These shares, presently held as
treasury stock, represent a 10.14% reduction in the total number of shares
outstanding. Moreover, the management group also assumed all liabilities and
obligations relating to the Creative Master Business.
2. PRO FORMA ADJUSTMENTS
A description of each pro forma adjustment follows.
(a) In consideration for the sale of the Creative Master Business, the
Company received 895,795 shares of its common stock valued at $4.9
million (based upon the closing price of PACT of $5.50 on the date of
sale) for net assets with a recorded book value of $19.9 million,
resulting in a pro forma book loss of approximately $15.0 million as
of January 1, 2000.
(b) Represents the number of Company shares received in exchange for the
assets and liabilities of the Creative Master Business, as defined.
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(c) Exhibits.
Exhibit 2.1 Press release of the Company, dated October 4, 2000.
Exhibit 2.2 Agreement dated September 30, 2000, among the Company and
the "Purchasers" named therein.
Exhibit 2.3 Supplemental Agreement, dated October 3, 2000, among the
Company and the "Purchasers" named therein.
Exhibit 2.4 Deed of Waiver, dated October 3, 2000, by Creative Master
Limited in favor of the Company.
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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 thereunto duly authorized.
Date: October 17, 2000 PACIFICNET.COM, INC
By: /s/ TONY I. TONG
---------------------------
Tony I. Tong
Chief Executive Officer
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EXHIBIT INDEX
NUMBER DESCRIPTION
------------ ---------------------------------------------------------------
2.1 Press release of the Company, dated October 4, 2000.
2.2 Agreement dated September 30, 2000, among the Company and the
"Purchasers" named therein.
2.3 Supplemental Agreement, dated October 3, 2000, among the Company
and the "Purchasers" named therein.
2.4 Deed of Waiver, dated October 3, 2000, by Creative Master
Limited in favor of the Company.
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