SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
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 28, 1999
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Grace Development, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 0-25582 84-1110469
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
1690 Chantilly Drive, Atlanta, Georgia 30324
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 633-3831
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Item 1. Changes in Control of Registrant.
A change in control of the Registrant occurred on September 28, 1999 (the
"Effective Time") pursuant to the terms and conditions of an Agreement and Plan
of Merger (the "Merger Agreement") dated as of August 20, 1999 between the
Registrant, New Millennium Multimedia, Inc., a Georgia corporation ("NM"), Grace
Newco, Inc., a Georgia corporation and wholly-owned subsidiary of the Registrant
("Merger Sub") and Signal Compression, Inc., a Nevada corporation ("Signal").
The Merger Agreement provided for the merger (the "Merger") of Merger Sub with
and into NM, with NM as the surviving corporation. As a result of the Merger, NM
became a wholly-owned subsidiary of the Registrant and the former shareholders
of NM received an aggregate of 66,223,329 or 89.70% of the outstanding shares of
the common stock, no par value, of the Registrant (the "Common Stock").
Effective as of the Effective Time, the Board of Directors of the Registrant
(the "Board"), which, prior to the Effective Time, was composed of Jacob
Barrocas as sole director, increased the size of the Board from one to six
members and the following persons were elected to the Board: Louis Friedman,
Richard S. Granville, III, Ronald McCallum, Dr. Lee Silverstein and Peter
Tierney (the "NM Designees"). Information with respect to the NM Designees,
including beneficial ownership of the Common Stock by such NM Designees, is
included in the Registrant's Information Statement pursuant to Section 14(f) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
14f-1 thereunder, filed by the Registrant on August 27, 1999, as amended on
September 24, 1999 and October 7, 1999 (the "Information Statement"), which is
incorporated herein by this reference. All references to the terms of the Merger
Agreement are qualified in their entirety by reference to the Merger Agreement,
which is attached as Exhibit 2.1 hereto and incorporated herein by this
reference.
At a meeting of the Board held on September 30, 1999, the Board voted to
increase the size of the Board to seven persons and elected James Blanchard to
the Board. The Board also elected the following persons to the offices set forth
opposite their names:
Louis Friedman Chairman of the Board
Richard S. Granville, III Chief Executive Officer
James Blanchard President
Ronald McCallum Chief Financial Officer and Secretary
Pursuant to the Merger Agreement, certain shares of Common Stock held by
Signal, which prior to the Merger held approximately 66% of the Common Stock and
following the Merger holds approximately 6.77% of the Common Stock, were pledged
to NM (the "Pledge Agreement") to secure certain indemnification obligations of
the Issuer to NM and the former shareholders of NM (the "Indemnitees"). The
terms of the Pledge Agreement provide for the release of a number of pledged
shares equal to one percent (1%) of the outstanding Common Stock on the Initial
Release Date and on each subsequent Release Date (each as defined in the Pledge
Agreement); provided that (a) no default has occurred and is continuing under
the Pledge Agreement); (b) the pledged shares remaining as collateral are
sufficient to satisfy the aggregate of claims made as of the Initial Release
Date or the Release Date, as the case may be; or (c) the pledgees shall not have
determined that a release of pledged shares would have an adverse
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impact on the market or trading activity for the Common Stock. Under the Pledge
Agreement, the Initial Release Date occurs thirty (30) days following the
effective date of the Merger and Release Dates occur at quarterly intervals
thereafter until the termination of the Pledge Agreement. The Pledge Agreement
terminates on the later of (i) eighteen months following the effective time of
the Merger and (ii) the resolutions of all indemnification claims made by the
Indemnitees under the Merger Agreement. All references to the terms of the
Pledge Agreement are qualified in their entirety by reference to the Pledge
Agreement, which is attached as an exhibit to the Merger Agreement, filed as
Exhibit 2.1 hereto and incorporated herein by this reference.
Because the shares of Common Stock received by the former shareholders of
NM were not registered under the Securities Act of 1933, as amended (the "Act"),
such shares are "restricted securities" (as defined in Rule 144 promulgated
under the Act) and accordingly, may not be sold or transferred by the holders
thereof unless such shares are registered under the Act or are sold or
transferred pursuant to an exemption therefrom.
Item 2. Acquisition or Disposition of Assets.
On September 28, 1999, the Merger was consummated in accordance with the
terms and conditions of the Merger Agreement. Pursuant thereto, Merger Sub, a
wholly-owned subsidiary of Registrant, was merged with and into NM, with NM as
the surviving corporation. Following the Merger, NM became a wholly-owned
subsidiary of the Registrant. In consideration for the Merger, the former
shareholders of NM received 66.3013 shares of Common Stock for each share of NM
Common Stock (the "Merger Consideration"). As a result thereof, the former
shareholders of NM now beneficially own an aggregate of 66,223,329
(approximately 89.70%) of the outstanding Common Stock. The Merger Consideration
was determined in arms' length negotiations between the parties to the Merger
Agreement. Prior to the consummation of the Merger, there were no material
relationships between NM and its former officers, directors, affiliates,
associates or shareholders and the officers, directors, affiliates, associates
or shareholders of the Registrant. As described in Item 1 of this Report, upon
consummation of the Merger, the NM Designees were elected to the Board and
certain officers of NM were elected officers of the Registrant. The response to
Item 1 of this Report is incorporated herein by this reference.
The foregoing description of the Merger and the Merger Agreement is
qualified in its entirety by reference to the Merger Agreement, which is being
filed as an exhibit to this report. In addition, the Registrant's Information
Statement and Report on Form 8-K dated August 20, 1999, which reported the
announcement of the execution of the Merger Agreement, is incorporated herein
and made a part hereof by this reference.
As a result of the Merger, the Registrant is a holding company for NM. NM,
doing business as Avana (www.avana.net), is an integrated communications
provider based in Atlanta, Georgia. In addition to providing internet services
to approximately 5,400 internet subscribers, Avana is seeking to become a
"bundled services" communications provider offering an array of communications
and related services, including, but not limited to, local dial tone, intra- and
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inter-state access, long distance, enhanced services, Internet, data private
lines, frame relay, ATM (asynchronous transfer mode), calling cards, wireless
and other communications services. Avana utilizes several network provides,
including ICG Communications and Qwest Communications. Avana also has an ongoing
relationship with Lucent Technologies for network solutions and implementation
services.
THIS REPORT INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION
27A OF THE ACT AND SECTION 21E OF THE EXCHANGE ACT. ALL STATEMENTS, OTHER THAN
STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS REPORT, INCLUDING, WITHOUT
LIMITATION, THOSE REGARDING THE REGISTRANT'S FINANCIAL POSITION, BUSINESS,
MARKETING AND PRODUCT DEVELOPMENT PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE
OPERATIONS, ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE REGISTRANT BELIEVES
THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired: Filed with the
Commission on November 16, 1999 in Amendment No. 1 to the
Registrant's Current Report on Form 8-K dated September 28, 1999 and
incorporated herein by reference.
(b) Pro Forma Financial Information. Filed with this report.
(c) Exhibits.
2.1 Agreement and Plan of Merger dated August 20, 1999 (filed with the
Commission with the Registrant's Current Report on Form 8-K dated September 28,
1999 and incorporated herein by reference).
20.1 Registrant's Information Statement pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 thereunder, filed by the Registrant on August 27,
1999, as amended on September 24, 1999 and October 7, 1999 (filed with the
Commission on August 27, 1999, September 24, 1999 and October 7, 1999, and
incorporated herein by reference).
23 Consent of Smith & Radigan (filed with the Commission on November 16,
1999 in Amendment No. 1 to the Registrant's Current Report on Form 8-K dated
September 28, 1999 and incorporated herein by reference).
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SIGNATURE
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.
GRACE DEVELOPMENT, INC.
By: /s/ RONALD MCCALLUM
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Ronald McCallum
Chief Financial Officer & Secretary
Dated as of December 8, 1999
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Item 7(b)
INDEX TO PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Form Condensed Consolidated Statements of Operations
for the Year Ended December 31, 1998
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 1999
Notes to Unaudited Pro Forma Consolidated Financial Statements
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GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Statements of
Operations for Grace Development, Inc. ("Grace") for the nine months ended
September 30, 1999 and for the year ended December 31, 1998 give retroactive
effect to the acquisition of Avana Communications, Inc. ("Avana") by New
Millennium Multimedia, Inc. ("NMM") as if they had occurred on January 1, 1998.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations do not
purport to be indicative of the actual results of operations of Grace had the
acquisition been completed at the beginning of the respective periods, and
should be read in conjunction with the Unaudited financial statements of Grace
and the audited financial statements of Avana and NMM and the related notes
thereto.
On May 5, 1999 NMM completed its acquisition of Avana. The acquisition was
accounted for as a purchase pursuant to Accounting Principles Board Statement
No. 16 "Business Combinations". Total consideration included the issuance of
97,824 shares of NMM stock later converted to 6,485,858 shares of Grace Stock,
and cash of $364,000. As a result of the acquisition, the Company recorded
goodwill of approximately $533,000, which is being amortized, on a straight-line
basis over five years.
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GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
New Millennium Avana
Multimedia, Inc. Communications, Inc. Adjustments Proforma
<S> <C> <C> <C> <C>
Revenues 833,509 833,509
Cost of Revenues 539,057 539,057
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Gross Profit -- 294,452 -- 294,452
Operating expenses
Sales and Marketing expenses 13,203 54,598 67,801
General and administrative expenses 7,146 269,388 276,534
Depreciation and amortization 506 29,114 [c] 106,597 136,217
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20,855 353,100 106,597 480,552
Operating Loss (20,855) (58,648) (106,597) (186,100)
Other income (expense)
Interest income 114 120 234
Interest expense --
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114 120 -- 234
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Net loss (20,741) (58,528) (106,597) (185,866)
=========== =========== ========= ==========
Net loss per share (0.02)
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Weighted average shares outstanding 8,640,651
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</TABLE>
See notes to unaudited Proforma Condensed Consolidated Financial Statements
<PAGE>
GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Grace Development
Inc. and subsidiaries Adjustments Proforma
<S> <C> <C> <C>
Revenues 500,431 [a] 313,908 814,339
Cost of Revenues 293,388 [a] 282,892 576,280
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Gross Profit 207,043 31,016 238,059
Operating expenses
Sales and Marketing expenses 67,635 [a] 3,216 70,851
General and administrative expenses 676,947 [a] 12,816 689,763
Depreciation and amortization 96,288 [a] 12,817
-- [b] 79,948 189,053
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840,870 108,797 949,667
Operating Loss (633,827) (77,781) (711,608)
Other income (expense)
Interest income 5,078 5,078
Interest expense (205,711) (205,711)
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(200,633) -- (200,633)
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Net loss (834,460) (77,781) (912,241)
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Net loss per share (0.03)
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Weighted average shares outstanding 36,352,318
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</TABLE>
See notes to unaudited Proforma Condensed Consolidated Financial Statements
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GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
NOTES TO UNAUIDTED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
Statements of Operations:
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For the nine months ended September 30, 1999
[a] To record operations of Avana for the period of January 1, 1999 to May 5,
1999 (date acquired by NMM).
[b] To reflect additional amortization of goodwill for the period of January 1,
1999 to May 5, 1999. Goodwill generated in the acquisition of Avana by NMM is
amortized on a straight-line basis over five years.
Statements of Operations:
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For the year ended December 31, 1998
[c] To reflect twelve months of amortization of goodwill. Goodwill generated in
the acquisition of Avana by NMM is amortized on a straight-line basis over five
years.
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INDEX TO EXHIBITS
Exhibit Number Method of Filing
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2.1 Filed with the Registrant's Current Report
on Form 8-K dated September 28, 1999 (the
"Merger 8-K") and incorporated herein by
reference.
20.1 Filed with the Commission on August 27,
1999, September 24, 1999 and October 7,
1999, and incorporated herein by reference.
23 Filed on November 16, 1999 in Amendment No.
1 to the Merger 8-K and incorporated herein
by reference.
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