SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 27, 2000
VIZACOM INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-14076 22-3270045
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
GLENPOINTE CENTER EAST
300 FRANK W. BURR BOULEVARD
TEANECK, NEW JERSEY 07666
(Address of principal executive offices) (Zip Code)
(201) 928-1001
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Effective March 27, 2000, we, Vizacom Inc., acquired PC Workstation
Rentals, Inc., d/b/a PWR Systems, a Long Island, New York-based designer and
integrator of Internet, intranet and extranet systems and other computer
networks and value-added-reseller of computer and digital communication
equipment. The acquisition was in the form of a merger of PWR into PWR
Acquisition Corp., one of our wholly-owned subsidiaries which we formed for this
transaction.
The acquisition was completed pursuant to an Agreement and Plan of Merger,
dated as of February 28, 2000, between us, PWR Acquisition, PWR and PWR's
shareholders. Pursuant to the merger agreement, at the closing of the
transaction, we made a cash payment to the PWR shareholders of $1 million and
delivered to the PWR shareholders our promissory notes in the aggregate
principal amount of $500,000. These notes are payable in twelve equal monthly
installments, commencing on April 27, 2000. These notes are convertible into
shares of our common stock, at a conversion price of $3.00 per share, and bear
interest at the imputed interest rate of the Internal Revenue Service on the
closing date. Accrued interest on these notes is payable with the monthly
principal payments. These notes have been guaranteed by our PWR subsidiary. The
stock portion of the acquisition consideration payable at closing was in the
form of 1,500,000 shares of our common stock.
The merger agreement provides for additional contingent consideration of up
to $350,000 per year for the three-year period following the closing of the
acquisition, based upon increases in PWR's earnings before interest, taxes,
depreciation and amortization. We are also obligated to issue additional shares
of our common stock if the market price of our common stock falls below $1.00
per share for any consecutive 30-day period during the one-year period following
the closing of the acquisition.
The 1,500,000 shares of our common stock issued at closing are subject to
lock-up agreements between each PWR shareholder and us. Under these lock-up
agreements, the PWR shareholders are prohibited from selling or otherwise
transferring any of the shares that they receive at closing, except for (a) 10%
of the shares received during a six month period commencing six months after the
closing, (b) an additional 10% during the next six-month period, and (c) an
additional 10% during the next six-month period. All remaining shares held by
the PWR shareholders two years after the closing will be free of any sale
restriction under the lock-up agreements. Any shares issued upon conversion of
our promissory notes delivered at closing in the aggregate principal amount of
$500,000 will not be subject to these lock-up agreements.
All of the shares of our common stock that may be issued in the acquisition
transaction, including those that may be issued upon conversion of the notes
delivered at closing, will be issued in reliance upon an exemption from
registration under the Securities Act of 1933. As a result, these shares will be
subject to restrictions on transfer under the applicable provisions of the
Securities Act. In accordance with the merger agreement, at the closing, we
entered into a registration rights agreement in which we granted the PWR
shareholders one demand and customary piggy-back registration rights.
2
<PAGE>
In accordance with the acquisition agreement, we made a capital
contribution of $2 million to PWR immediately following the closing.
We have entered into three year employment agreements with each of PWR's
executive officers and sole stockholders, Vincent DiSpigno and David N. Salav.
The employment agreements with each of Messrs. DiSpigno and Salav provide for
their service as vice presidents of Vizacom and as executive officers of our PWR
subsidiary. We are also obligated to expand our Board of Directors and cause the
election of each of Messrs. DiSpigno and Salav to our expanded Board. Each of
these employment agreements also provide for annual base salaries of $200,000,
provide for annual bonuses of up to $25,000, based upon PWR attaining specified
performance thresholds, and contain restrictions on their engaging in
competition with us for the term of the agreement and for one year thereafter
and provisions protecting our proprietary rights and information.
Prior to the closing, PWR delivered to the PWR shareholders promissory
notes in the aggregate principal amount $888,638. This amount represents an
estimate of PWR's accumulated retained earnings as of March 27, 2000. These
notes bear interest at the IRS imputed interest rate on the closing date and are
payable in four quarterly payments, commencing June 27, 2000. The principal
amount of these PWR notes will be adjusted to reflect PWR's actual retained
earnings at March 31, 2000. Payment of any amount outstanding under these PWR
notes will be accelerated to the date of our receipt of aggregate gross proceeds
of at least $15 million from the sale of our securities since November 12, 1999.
We have guaranteed these PWR notes.
We have granted options to purchase an aggregate of 750,000 shares of our
common stock under our 1994 Long Term Incentive Plan to PWR employees, in
accordance with the merger agreement. Of these option grants, options to
purchase 125,000 shares have been granted to each of Messrs. DiSpigno and Salav.
Item 5. Other Matters.
On March 20, 2000, we repaid all outstanding amounts due Churchill
Consulting under our line of credit facility arrangement with Churchill
Consulting.
On March 27, 2000, we accepted subscriptions for and sold a total of
762,471 shares of our common stock to eleven foreign investors for gross
proceeds of $3,392,995.95. The issuances of these shares were private
transactions exempt from registration pursuant to Section 4(2) of, and
Regulation S promulgated under, the Securities Act.
3
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The required financial statements of a PC Workstation Rentals, Inc.
have been included in our Annual Report on Form 10-KSB for the year ended
December 31, 1999, commencing on page F-51, and are incorporated in this Form
8-K/A No. 1 by reference to such Form 10-KSB.
(b) PRO FORMA FINANCIAL INFORMATION.
The required pro forma financial information is set forth below:
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information gives effect to the Renaissance Multimedia merger, Junction 15
acquisition and PWR Systems merger, using the purchase method of accounting, and
the effect of the recent sales of our common stock necessary to complete these
acquisitions, after giving effect to the pro forma adjustments described in the
accompanying notes. We are providing this pro forma financial information to aid
you in your analysis of the financial condition of Vizacom following these
mergers, acquisition and financings. We derived this pro forma financial
information from the audited financial statements of Vizacom, Renaissance
Multimedia, Junction 15 and PWR Systems, each for the year ended December 31,
1999. The unaudited pro forma condensed consolidated financial information
should be read in conjunction with the audited historical financial statements
and related notes of Vizacom, Renaissance Multimedia, Junction 15 and PWR
Systems, which are each included in this Annual Report on Form 10-KSB. The
unaudited pro forma condensed consolidated balance sheet gives effect to these
mergers, acquisition and financings as if they had each occurred on December 31,
1999 and combines the unaudited condensed consolidated historical balance sheets
of Vizacom, Renaissance Multimedia, Junction 15 and PWR Systems as of December
31, 1999. The unaudited pro forma condensed consolidated statements of income
for the year ended December 31, 1999 assume these mergers, acquisition and
financings were each effected on January 1, 1999. The unaudited pro forma
condensed consolidated financial information is presented for illustrative
purposes only and does not purport to be indicative of the operating results or
financial position that would have actually occurred if these mergers,
acquisition and financings had each been effected on the dates indicated, nor is
it indicative of our future operating results or financial position. The pro
forma adjustments are based on the information and assumptions available as of
March 31, 2000.
4
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1999
<TABLE>
<CAPTION>
Historical
---------------------------------------------------- Pro Forma Pro Forma
Vizacom Renaissance Junction 15 PWR Adjustments Consolidated
------- ----------- ----------- --- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 1,730,495 $ 131,316 $ 40 $ 457,850 $ 2,885,175 (A) $ 5,204,876
Marketable securities 2,746,678 -- -- -- (1,992,519)(B) 754,159
Receivables, net 733,410 245,270 231,862 3,692,224 -- 4,902,766
Inventories 1,457,604 -- 5,363 567,836 -- 2,030,803
Prepaid expenses and
other current assets 526,552 19,854 -- 3,426 -- 549,832
------------ ------------ ------------- ----------- ------------ --------------
Total current assets 7,194,739 396,440 237,265 4,721,336 892,656 13,442,436
Property and equipment,
net 828,108 81,677 39,009 6,189 -- 954,983
Goodwill and other
intangibles, net 118,665 -- -- -- 13,022,923 (F) 13,141,588
Restricted cash 259,838 -- -- -- -- 259,838
Deferred consulting costs 1,269,859 -- -- -- -- 1,269,859
Other assets, net 803,762 14,424 -- 18,904 -- 837,090
------------ ------------ ------------- ----------- ------------ --------------
Total assets $10,474,971 $ 492,541 $ 276,274 $4,746,429 $13,915,579 $ 29,905,794
============ ============ ============= =========== ============ ==============
Revolving lines of credit $ -- $ -- $ -- $1,748,131 $ -- $ 1,748,131
Notes payable -- 13,663 -- 850,000 1,281,015 (C) 2,144,678
Accounts payable 4,111,748 57,451 38,859 1,340,160 -- 5,548,218
Accrued and other
liabilities 1,816,744 158,352 100,137 46,288 -- 2,121,521
Value-added taxes payable 393,927 -- 62,290 -- -- 456,217
Due to shareholder -- 19,475 -- -- (19,475)(D) --
Current portion of capital
lease obligations 63,792 6,793 -- -- -- 70,585
Current portion of long-
term debt 155,554 -- 66,151 -- (66,151)(A) 155,554
------------ ------------ ------------- ----------- ------------ --------------
Total current liabilities 6,541,765 255,734 267,437 3,984,579 1,195,389 12,244,904
Capital lease obligation,
long term 98,265 1,803 -- -- -- 100,068
Long-term debt, less
current maturities 100,410 39,381 19,194 -- (19,194) (A) 139,791
------------ ------------ ------------- ----------- ------------ --------------
Total liabilities 6,740,440 296,918 286,631 3,984,579 1,176,195 12,484,763
------------ ------------ ------------- ----------- ------------ --------------
Common stock, $.001
par value 7,236 1,000 6,935 13 (4,198)(E) 10,986
Additional paid-in capital 49,851,699 119,577 26,534 17,107 13,519,532 (E) 63,534,449
(Accumulated deficit)
retained earnings (47,864,635) 75,046 (43,826) 781,015 (812,235)(E) (47,864,635)
Treasury stock (10,395) -- -- (36,285) 36,285 (E) (10,395)
Other comprehensive
income (loss) 1,750,626 -- -- -- -- 1,750,626
------------ ------------ ------------- ----------- ------------ -------------
Total stockholders'
equity 3,734,531 195,623 (10,357) 761,850 12,739,384 17,421,031
------------ ------------ ------------- ----------- ------------ -------------
Total liabilities and
stockholders' equity $10,474,971 $ 492,541 $ 276,274 $4,746,429 $13,915,579 $ 29,905,794
============ ============ ============= =========== ============ =============
</TABLE>
5
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
PRO FORMA ADJUSTMENTS
December 31, 1999
NOTE A CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Renaissance Junction 15 PWR Financing Total
<S> <C> <C> <C> <C> <C>
Cash portion of purchase price $ (250,000) $ (250,000) $(1,000,000) $ -- $(1,500,000)
Legal and accounting fees for
acquisitions (175,000) (85,000) (200,000) -- (460,000)
Finder's fees paid in cash -- (69,480) -- -- (69,480)
Funds raised as a requirement
of PWR acquisition -- -- -- 5,000,000 5,000,000
------------ ------------- ------------ ----------- ------------
(425,000) (404,480) (1,200,000) 5,000,000 2,970,520
Repayment of loans concurrent
with purchase -- (85,345) -- -- (85,345)
------------ ------------- ------------ ----------- ------------
Net impact of acquisitions
and financing on cash $ (425,000) $ (489,825) $(1,200,000) $5,000,000 $ 2,885,175
============ ============= ============ =========== ============
</TABLE>
NOTE B MARKETABLE SECURITIES
In an August 10, 1999 agreement, the Company agreed to pay a finder a 10% fee,
payable in shares of Xceed, Inc. in connection with acquisitions at that date's
market value of $13.375. The fees were calculated as follows:
<TABLE>
<CAPTION>
Renaissance PWR Total
<S> <C> <C> <C>
Gross purchase price . . . . . . $ 2,000,000 $ 6,000,000
10% fee. . . . . . . . . . . . . 200,000 600,000
Conversion price per agreement . 13.375 13.375
Shares due to finder under the
agreement . . . . . . . . . 14,953 44,860
Market value of Xceed shares
at closing date . . . . . . 39.875 31.125
------------- -------------
Finder's fee paid in Xceed
shares. . . . . . . . . . . $ 596,251 $ 1,396,268 $ 1,992,519
============= ============= =============
Realized gain on disposition
of Xceed shares . . . . . . $ (127,061) $ (381,279) $ (508,340)
============= ============= =============
</TABLE>
NOTE C NOTES PAYABLE
<TABLE>
<CAPTION>
PWR Total
<S> <C> <C>
Note payable for retained earnings at closing $ 781,015 $ 781,015
Convertible note . . . . . . . . . . . . . 500,000 500,000
------------ -----------
Note payable resulting from PWR acquisition . $ 1,281,015 $1,281,015
============ ===========
</TABLE>
NOTE D DUE TO SHAREHOLDER
<TABLE>
<CAPTION>
Renaissance Total
<S> <C> <C>
Debt forgiven by shareholder on acquisition
closing. . . . . . . . . . . . . . . . . $ 19,475 $ 19,475
============ ===========
</TABLE>
6
<PAGE>
NOTE E STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Renaissance Junction 15 PWR Financing Total
<S> <C> <C> <C> <C>
Common shares issued in
acquisitions and financing $ 449,870 $ 681,818 $ 1,500,000 $ 1,117,739 $ 3,749,427
============= ============ ============ ============= ============
Market price per share $ 3.89 $ 3.30 $ 3.00 $ 4.47
Common stock, $.001 par value 450 682 1,500 1,118 3,750
Elimination of acquired
companies' common stock (1,000) (6,935) (13) -- (7,948)
----------- ------------ ------------ ------------ ------------
Effect on common stock account $ (550) $ (6,253) $ 1,487 $ 1,118 $ (4,198)
============ ============ ============ ============ ============
Paid-in capital $ 1,749,550 $ 2,249,318 $ 4,498,500 $ 4,998,882 $13,496,250
Elimination of acquired
companies' paid-in capital (119,577) (26,534) (17,107) -- (163,218)
Value of 50,000 options issued
to PWR consultants -- -- 186,500 -- 186,500
------------ ------------ ------------ ------------ ------------
Elimination of acquired companies:
Effect on additional paid-in
capital $ 1,629,973 $ 2,222,784 $ 4,667,893 $ 4,998,882 $13,519,532
============ ============ ============ ============ ============
(Accumulated deficit) retained
earnings $ 75,046 $ (43,826) $ 781,015 $ -- $ (812,235)
============ ============ ============ ============ ============
Treasury stock $ -- $ -- $ (36,285) $ -- $ 36,285
============ ============ ============ ============ ============
</TABLE>
NOTE F GOODWILL AND OTHER INTANGIBLES
Goodwill arose from the preliminary assignment of fair values to the assets
and liabilities acquired. The amount may increase or decrease as a result of the
contingent consideration on the PWR acquisition. Additionally, further
assessment of fair values and completion of any appraisals may result in changes
in either valuation or allocation of the excess purchase price over fair value.
For the above pro forma goodwill was determined as follows:
<TABLE>
<CAPTION>
Renaissance Junction 15 PWR Total
<S> <C> <C> <C> <C>
Cash paid as indicated in Note A $ 425,000 $ 404,480 $ 1,200,000 $ 2,029,480
Stock issued as indicated in Note E 1,750,000 2,250,000 4,500,000 8,500,000
Notes issued as indicated in Note C -- -- 1,281,015 1,281,015
Marketable securities issued as indicated in Note B 596,251 -- 1,396,268 1,992,519
Forgiveness of shareholder debt upon acquisition (19,475) -- -- (19,475)
Consultant options indicated in Note E -- -- 186,500 186,500
------------ ------------ ----------- ------------
Total consideration paid 2,751,776 2,654,480 8,563,783 13,970,039
Less: Fair value of acquired net assets (liabilities)
based on preliminary assessment 195,623 (10,357) 761,850 947,116
------------ ------------ ----------- ------------
Goodwill and other intangibles $ 2,556,153 $ 2,664,837 $ 7,801,933 $13,022,923
============ ============ ============ ============
</TABLE>
7
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Historical
---------------------------------------------------- Pro Forma Pro Forma
Vizacom Renaissance Junction 15 PWR Adjustments Consolidated
------- ----------- ----------- --- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $19,891,357 $1,531,400 $ 717,804 $15,928,205 -- $38,068,766
Cost of goods sold 6,371,106 546,490 303,840 13,094,364 -- 20,315,800
------------ ----------- ----------- ------------ ------------- ------------
Gross profit 13,520,251 984,910 413,964 2,833,841 -- 17,752,966
Expenses:
Selling, general and
administrative expenses 17,175,520 925,276 392,939 2,371,756 $ 179,000 (G) 21,044,491
Product development 1,027,447 -- -- -- -- 1,027,447
Amortization of goodwill
and other intangibles 2,219,363 -- -- -- 1,860,418 (I) 4,079,781
Unrealized holding gain (322,652) -- -- -- -- (322,652)
Realized gain (642,444) -- -- -- (508,340)(B) (1,150,784)
Other (income) expense,
net (59,503) (1,668) -- 83,031 47,871 (H) 69,731
------------ ----------- ----------- ------------ ------------- ------------
19,397,731 923,608 392,939 2,454,787 1,578,949 24,748,014
------------ ----------- ----------- ------------ ------------- ------------
(Loss) income before
income taxes (5,877,480) 61,302 21,025 379,054 (1,578,949) (6,995,048)
Income tax (benefit)
expense (250,978) 23,000 -- 12,541 -- (215,437)
------------ ----------- ----------- ------------ ------------- ------------
Net (loss) income (5,626,502) 38,302 21,025 366,513 (1,578,949) (6,779,611)
Dividends on Series A
and Series C
preferred stock (56,641) -- -- -- -- (56,641)
------------ ----------- ----------- ------------ ------------- ------------
Net (loss) income
attributable to
common stockholders $(5,683,143) $ 38,302 $ 21,025 $ 366,513 $ (1,578,949) $ (6,836,252)
============ =========== =========== ============ ============= =============
Pro forma loss per share -
Basic and diluted:
Net loss per share $ (0.95) $ (0.70)
============ =============
Weighted average
number of shares 5,996,507 9,745,934
============ =============
</TABLE>
8
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
PRO FORMA ADJUSTMENTS
For the Year Ended December 31, 1999
NOTE G EMPLOYMENT AGREEMENTS
Represents the additional cost relating to PWR of $61,000 and Junction 15 of
$118,000 for compensation expense as a result of the employment agreements.
NOTE H INTEREST EXPENSE
Represents interest at 6.3% for the PWR retained earnings note and convertible
note, assuming no conversion (described in Note C), as well as the repayment of
Junction 15 indebtedness.
NOTE I AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES
To record amortization based on a seven-year life.
9
<PAGE>
(c) EXHIBITS.
Listed below are all exhibits to this Current Report on Form 8-K/A
No 1.
Exhibit
Number Description
- ------ -----------
10.1 Agreement and Plan of Merger, dated as of February 28, 2000, among
Vizacom Inc., PWR Acquisition Corp., PC Workstation Rentals, Inc.,
d/b/a PWR Systems and the stockholders of PC Workstation Rentals, Inc.
10.2 Amendment No. 1 to Merger Agreement, dated March 27, 2000, among
Vizacom Inc., PWR Acquisition Corp., PC Workstation Rentals, Inc.,
d/b/a PWR Systems and the shareholders of PC Workstation Rentals,
Inc.*
10.3 Convertible Note, dated March 27, 2000, of Vizacom Inc. in the
principal amount of $250,000 and payable to Vincent DiSpigno.*
10.4 Convertible Note, dated March 27, 2000, of Vizacom Inc. in the
principal amount of $250,000 and payable to David Salav.*
10.5 Lock-Up Agreement, dated March 27, 2000, between Vizacom Inc. and
Vincent DiSpigno.*
10.6 Lock-Up Agreement, dated March 27, 2000, between Vizacom Inc. and
David Salav.*
10.7 Registration Rights Agreement, dated March 27, 2000, among
Vizacom Inc., Vincent DiSpigno and David Salav.*
10.8 Employment Agreement, dated March 27, 2000, between Vizacom Inc. and
Vincent DiSpigno.*
10.9 Employment Agreement, dated March 27, 2000, between Vizacom Inc. and
David Salav.*
10.10 Promissory Note, dated March 27, 2000, of PC Workstation Rentals,
Inc. in the aggregate principal amount of $444,319 and payable
to Vincent DiSpigno.
10.11 Promissory Note, dated March 27, 2000, of PC Workstation Rentals, Inc.
in the aggregate principal amount of $444,319 and payable to David
Salav.*
10.12 Letter Agreement, dated March 27, 2000, among Vizacom Inc., PWR
Acquisition Corp., PC Workstation Rentals, Inc., d/b/a PWR Systems,
and the stockholders of PC Workstation Rentals, Inc.*
23.1 Consent of Deloitte & Touche LLP.
99.1 Press Release, dated March 28, 2000.*
- ------------------
* Previously filed with Form 8-K on April 4, 2000.
10
<PAGE>
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.
Dated: April 17, 2000
VIZACOM INC.
By: /s/ Alan W. Schoenbart
-------------------------------------
Alan W. Schoenbart
Vice President - Finance and
Chief Financial Officer
11
Exhibit 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Form S-8 (Nos. 333-82959,
333-82951 and 333-19059), and Form S-3 (Nos. 333-55677, 33-80181, and 333-93087)
of Vizacom, Inc. of our Report dated March 23, 2000 (March 27, 2000 as to Note
12) with respect to the combined financial statements of P.C. Workstation
Rentals, Inc. and Storageland, Inc., appearing in this Current Report on Form
8-K/A No. 1 of Vizacom, Inc.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Jericho, New York
April 13, 2000
