SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): October 16, 1998
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The Netplex Group, Inc.
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(Exact name of registrant as specified in its charter)
New York 1-11784 11-2824578
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
8260 Greensboro Drive, 5th Floor, McLean, Virginia 22101
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(Address of principal executive offices)
Registrant's telephone number, including area code: (703) 356-1717
N/A
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(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets.
On October 16, 1998, The Netplex Group, Inc. (the "Company" or
"Netplex") completed the purchase of the information technology consulting
business of Applied Intelligence Group, Inc. of Oklahoma City ("AIG"). In
consideration for the purchase, the Company paid $3,000,000 and issued 643,770
shares of Class B Preferred Stock ("Preferred Stock") (valued at $1,000,000) at
closing. The Company used working capital to finance the acquisition. Such
working capital was provided by (i) an increase in the Company's line of credit
from First Union National Bank from $2.0 million to $6.0 million, which credit
line is based on 80% of the Company's eligible accounts receivable and (ii)
certain equity instruments as described under Item 5. -- Other Events below. The
Class B Preferred Stock is convertible into Common Stock of the Company at any
time on a share for share basis. No dividends are payable on the Preferred
Stock. The holders of the Preferred Stock have agreed not to sell or otherwise
distribute their Preferred Stock on the Common Stock underlying the Preferred
Stock for a period of one year. The agreement also provides that AIG will
receive additional consideration (the "Earn-out") if AIG meets certain operating
targets. Such Earn-out would consist of (i) $1.5 million of cash if AIG achieves
certain net profit targets over the next six quarters and (ii) 643,700 shares of
Preferred Stock if AIG achieves certain net profit targets over the next 9
quarters. The acquisition was accounted for using the purchase method of
accounting.
In connection with the acquisition, the Company will enter
into employment agreements with certain employees of AIG.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
In August 1998 the Company raised $592,000 of financing in a
Private Placement raised primarily from accredited investors and employees of
the Company. The Company issued shares of non-registered Common Stock to
purchasers who have agreed not to sell or otherwise distribute their shares for
a period of one year. These restricted shares carry registration rights and were
offered at $1.325 per share. The funds will be used to finance operations and
additional acquisitions.
In September 1998 Netplex completed a $1.7 million Private
Placement consisting of (i) prepaid Common Stock purchase warrants entitling the
holder to acquire such number of shares of the Company's Common Stock as is
equal to $1,000 divided by an adjustable exercise price (initially $1.3936) and
(ii) incentive warrants to acquire approximately 142,000 shares of Common Stock
at an exercise price of $1.3936 per share. The Prepaid Warrant will be
exercisable at a price equal to 125% of the initial exercise
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price for the first year from issuance and thereafter will decline in accordance
with the terms of the Prepaid Warrant. The Prepaid Warrant can be redeemed by
the Company at the exercise price plus 35% per annum or the benefit of the
bargain, which ever is higher. The Prepaid Warrants are held by Goldman Sachs
Performance Partners, L.P. and Goldman Sachs Performance Partners (Offshore),
L.P. The Zanett Corporation acted as placement agent and received placement fees
and a non-accountable expense allowance equal to 12.53% of the proceeds of the
offering.
In September 30, 1998, Netplex also issued Waterside
Corporation, a Virginia based SBIC ("Waterside") $1.5 million of Class C
Convertible Preferred Stock ("Class C Preferred Stock") which is convertible
commencing five years from the date of issuance. The Class C Convertible
Preferred Stock is redeemable at any time at a per share redemption price equal
to $1.00 plus accrued and unpaid dividends. In connection with the transaction,
Waterside received warrants to purchase 150,000 shares of Common Stock at an
exercise price of $1.375 per share. Waterside will receive an additional 100,000
Warrants for each 18 month period the Class C Preferred Stock is outstanding, up
to a total of 400,000 additional warrants.
Exhibit No. Description
99.1 Audited Financial Statements for Applied Intelligence
Group, Inc. for the year ended December 31, 1997.
99.2 Pro forma financial information (to be filed within
60 days of the filing of this Report on Form 8-K).
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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 hereunto duly authorized.
THE NETPLEX GROUP, INC.
Dated: October 30, 1998 By: /s/ Gene Zaino
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Name: Gene Zaino
Title: Chairman of the Board
and President
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