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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 22, 1998
Date of Report (Date of earliest event reported)
NHANCEMENT TECHNOLOGIES INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-21999 84-1360852
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(State or Other Jurisdiction (Commission File Number) (IRS Employer Identification
of Incorporation) No.)
39420 Liberty Street
Suite 250
Fremont, CA 94538
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(Address of principal executive offices, including zip code)
(510) 744-3333
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(Registrant's telephone number, including area code)
This current report on Form 8-K dated June 22, 1998 (the "Report"), relates to
the Registrant's completion of the acquisition (the "Acquisition") of one
hundred percent (100%) of all the issued and fully paid up shares of Infotel
Technologies (Pte) Ltd, a corporation organized and existing under the laws of
Singapore ("Infotel"). As a result of the Acquisition, Infotel became a
wholly-owned subsidiary of the Registrant on June 22, 1998, the effective date
of the Acquisition.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) Pursuant to an Agreement for the Sale of Shares in Infotel Technologies
(Pte) Ltd ("Infotel") between NHancement Technologies Inc., a Delaware
corporation ("NHancement" or the "Company"), and the five individuals ("Infotel
Shareholders") who owned one hundred percent (100%) of all of the issued and
fully paid up shares of Infotel, dated as of January 19, 1998 (the "Original
Agreement"), as amended by three Supplemental Agreements, dated as of April 2,
1998, April 22, 1998 and June 22, 1998, respectively (individually "Supplement
No. 1," "Supplement No. 2" and "Supplement No. 3," and collectively with the
Original Agreement referred to as the "Agreement"), NHancement purchased one
hundred percent (100%) of the shares of Infotel (the "Acquisition").
Consummation of the Acquisition, pursuant to the Agreement, occurred on June 22,
1998. As a result of the Acquisition, Infotel has become a wholly-owned
subsidiary of NHancement. Infotel is a provider and integrator of infrastructure
communications equipment products, providing radar system integration, turnkey
project management services and test instrumentation, as well as a portfolio of
communication equipment in Asia.
The consideration paid to the Infotel Shareholders in connection with
the Acquisition consisted of cash in the amount of S$3,750,000 (US$2,325,000 at
a translation rate of 1.62) and 432,500 shares of Common Stock of NHancement
("NHancement Shares"), paid to each Infotel Shareholder pro rata proportional to
his Infotel share ownership. Additionally, the Infotel Shareholders have the
opportunity to receive up to a maximum of S$3,200,000 (approximately US$
1,844,000 at current rates) in additional cash payments if Infotel exceeds
certain minimum profit levels for its next two fiscal years ending June 30, 1998
and 1999. All NHancement Shares distributed to the Infotel Shareholders pursuant
to the Agreement were issued by NHancement in reliance upon Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"), and are subject to
restrictions on transferability under the 1933 Act. In addition, the NHancement
Shares are subject to a lock-up provision prohibiting transfer of fifty percent
(50%) of the shares for one year following the effective date of the Original
Agreement, and prohibiting transfer of the remaining fifty percent (50%) until
the second anniversary of the effective date of the Original Agreement.
Pursuant to the Agreement, the transaction was to have been consummated
on or before March 16, 1998 (the "Completion Date"), or such later date as
agreed to by the parties. Based upon the exchange rate in effect on the initial
March Completion Date of 1.65 Singapore Dollars to the United States Dollar, the
cash consideration initially payable to the Infotel Shareholders under the
Agreement was approximately US$2,273,000 (the "Initial Cash Consideration"). The
Company was unable to raise the Initial Cash Consideration by the Completion
Date. Pursuant to Supplement No. 1 between the Company and the Infotel
Shareholders, the Infotel Shareholders agreed to defer the Completion Date to
April 13, 1998. As consideration for such deferral, the Company agreed to pay to
each of the Infotel Shareholders' interest on the Initial Cash Consideration for
the period from March 16 through April 13, 1998, at the rate of 2% above the
prime lending rate of the Development Bank of Singapore Ltd. (the "prime rate").
In addition, the Company agreed that the liability of the Infotel Shareholders
for breach of their warranties under the Agreement would be limited to the
period prior to March 16, 1998.
The Company was also unable to raise the Initial Cash Consideration by
April 13, 1998. Pursuant to Supplement No. 2 between the Company and the Infotel
Shareholders, the Infotel Shareholders again agreed to defer the Completion
Date, this time to and including June 24, 1998. As consideration for such
deferral, the Company agreed to pay to each of the Infotel Shareholders interest
on the Initial Cash Consideration at the rate of three percent (3%) above the
prime rate, for the period from April 14 through June 24, 1998. In addition,
among other things, the Company agreed to further limitations on the Infotel
Shareholders' liability for breach of their warranties for the period from April
14 to June 24, 1998.
The Infotel Shareholders also required that the Company deposit
S$1,500,000 in an attorneys' interest-bearing account. If for any reason the
Company had not been able to complete the Acquisition by June 24, 1998, then
S$500,000, plus accrued interest thereon, from the deposit would have been paid
to the Infotel Shareholders as a non-refundable break-up fee, with the balance
being returned to the Company. Additionally, the Agreement would have terminated
and the Vendors would not have been responsible for any of their obligations
under the
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Agreement. However, as a result of the Company's having raised by June 22, 1998
the additional cash necessary to pay the Initial Cash Consideration, the entire
S$1,500,000, exclusive of accrued interest, was paid to the Infotel Shareholders
as a partial payment of the Initial Cash Consideration, with the balance coming
from other funds of the Company, including the bridge loan funds described
below. The accrued interest was paid to the Infotel Shareholders as additional
consideration.
The 432,500 shares of Common Stock issued to the Infotel Shareholders
are subject to a possible upward adjustment if the Company's Common Stock is
trading on the Nasdaq SmallCap Market System, or any other public exchange, at
below US$5.00 per share on either of the first or second anniversary dates of
the June Completion Date. The Infotel Shareholders may also receive additional
cash performance payments of up to a maximum of S$3,200,000 (approximately
US$1,844,000 at current rates) if Infotel meets certain after tax profit goals
for its fiscal years ending June 30, 1998 and 1999. Additionally, the Company
has agreed to provide up to S$300,000 (approximately US$181,800) as incentive
bonuses payable to Infotel's key employees if Infotel meets certain profit
targets for its fiscal years ending June 30, 1998, 1999 and 2000.
In connection with the closing of the Acquisition, the Company entered
into Supplement No. 3 to the Agreement, pursuant to the terms of which the
Company agreed to pay to certain of the Infotel Shareholders cash in the
aggregate amount of S$500,000 (approximately US$300,000 at current rates) in the
event that the Company is unable to secure the release of certain personal
guarantees of existing Infotel loan obligations made by such Infotel
Shareholders. The Company is obligated to make such payments if the guarantees
are not discharged by July 22, 1998. Additionally, the Company agreed that
during the pendency of such personal guarantees, no dividends will be declared
or paid by Infotel and Infotel's moneys will not be lent to or be applied
towards the working capital needs of Nhancement (and additionally will not be
used in contravention of any Singapore regulatory restrictions affecting same).
The funds used to acquire Infotel were derived from working capital and
the proceeds of a bridge loan financing that closed in separate closings held on
June 12, 1998 and June 15, 1998. Under the terms of the bridge loan made by the
holders of Series A Convertible Preferred Stock (the "Preferred Stockholders")
and certain members of management, NHancement borrowed funds in the aggregate
amount of $1,400,000.
Interest is payable on the promissory notes evidencing this debt at a
rate of 10% per annum. Funds loaned to the Company by the Preferred Stockholders
totaled $750,000. The notes payable to the Preferred Stockholders provide for
repayment on the earlier of the closing of the next tranche of the Company's
Series A Convertible Preferred Stock in accordance with the terms of the
Securities Purchase Agreement dated April 13, 1998 or 90 days from the date of
the loan. The principal amount of the promissory notes payable to the Preferred
Stockholders may be applied against the purchase price of the additional Series
A Convertible Preferred Stock available for purchase under the Securities
Purchase Agreement entered into between the Company and the Preferred
Stockholders, subject to receipt of certain approvals by the stockholders of the
Company with respect to the issuance of shares of the Common Stock of the
Company into which the shares of Series A Convertible Preferred Stock are
convertible.
Funds loaned to the Company by members of management totaled $650,000.
Of this amount, $125,000, $225,000 and $300,000 were loaned to NHancement by
Esmond T. Goei, Chairman of the Board and Chief Executive Officer of the
Company, Douglas S. Zorn, Executive Vice President and Chief Financial Officer
of the Company, and James S. Gillespie, formerly the President of Voice Plus,
Inc. and currently a member of the Board of Directors of the Company,
respectively. The notes payable to management provide for repayment within 90
days from the date of the loan. In the event of any partial repayment, partial
repayments are to be apportioned as follows: (i) the first $75,000 of any
partial repayment is to be paid first to Mr. Gillespie, (ii) the next $200,000
of any partial repayment is to be paid equally to Mr. Gillespie and Mr. Zorn and
(iii) the remaining payments are to be pro rated equally among all three members
of management until these loans have been repaid in full.
(b) Not applicable.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Exhibit 99.1 hereto incorporates by reference from the Company's
Registration Statement on Form S-3 (Commission File No.
333-52709) the audited and unaudited financial statements of
Infotel Technologies (Pte) Ltd required to be filed for the
periods specified in Rule 3-05 of Regulation S-X.
(b) PRO FORMA FINANCIAL INFORMATION.
Exhibit 99.2 hereto incorporates by reference from the Company's
Registration Statement on Form S-3 (Commission File No.
333-52709) the pro forma financial information required to be
filed pursuant to Article 11 of Regulation S-X.
(c) Exhibits
Exhibit
Number Description
2.1 Agreement relating to the sale and purchase of 500,000 ordinary
shares in the capital of Infotel Technologies (Pte) Ltd
("Infotel"), dated as of January 19, 1998, by and between the
Company and the stockholders of Infotel (the "Sale Agreement"),
incorporated by reference to the document bearing the same
exhibit number as contained in the Company's Registration
Statement on Form S-3 (Commission File No. 333-52709), as
initially filed with the Securities and Exchange Commission on
May 14, 1998.
2.2 Letter agreement amending the Sale Agreement, dated as of April
2, 1998, by and between the Company and the stockholders of
Infotel ("Supplement No. 1"), incorporated by reference to the
document bearing the same exhibit number as contained in the
Company's Registration Statement on Form S-3 (Commission File No.
333-52709), as initially filed with the Securities and Exchange
Commission on May 14, 1998.
2.3 Form of letter agreement amending the Sale Agreement, as amended
by Supplement No. 1, dated as of April 22, 1998, by and between
the Company and the stockholders of Infotel ("Supplement No. 2"),
incorporated by reference to the document bearing the same
exhibit number as contained in the Company's Registration
Statement on Form S-3 (Commission File No. 333-52709), as
initially filed with the Securities and Exchange Commission on
May 14, 1998.
2.4 Letter agreement amending the Sale Agreement, as amended by
Supplement No. 1 and Supplement No. 2, dated as of June 22, 1998,
by and between the Company and the stockholders of Infotel.
4.1 Form of certificate evidencing Common Stock, $.01 par value, of
the Company, incorporated by reference to the document bearing
the same exhibit number as contained in Registrant's Registration
Statement on Form SB-2 (Commission File No. 333-15563), as filed
with the Securities and Exchange Commission on November 5, 1996.
10.1 Promissory Note, dated as of June 15, 1998, in the original
principal amount of $375,000, payable by the Company to AMRO
INTERNATIONAL S.A. ("Amro").
10.2 Promissory Note, dated as of June 15, 1998, in the original
principal amount of $375,000, payable by the Company to Endeavour
Capital Fund S.A. ("Endeavour").
10.3 Letter agreement, dated as of June 15, 1998, amending Securities
Purchase Agreement, dated as of April 13, 1998, by and among the
Company, Amro and Endeavour.
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10.4 Letter agreement, dated as of June 12, 1998, by and among the
Company, Esmond T. Goei, Douglas S. Zorn and James S. Gillespie.
10.5 Promissory Note, dated as of June 12, 1998, in the original
principal amount of $125,000, payable by the Company to Esmond T.
Goei.
10.6 Promissory Note, dated as of June 12, 1998, in the original
principal amount of $225,000, payable by the Company to Douglas
S. Zorn.
10.7 Promissory Note, dated as of June 12, 1998, in the original
principal amount of $300,000, payable by the Company to James S.
Gillespie.
99.1 Infotel Technologies (Pte) Ltd Audited Financial Statements for
the Years Ended June 30, 1996 and 1997 (with unaudited
information as of March 31, 1998 and for the three and nine
months ended March 31, 1997 and 1998), is incorporated by
reference to pages F-1 to F-20 of pre-effective Amendment No. 1
to the Company's Registration Statement on Form S-3 (Commission
File No. 333-52709), as filed with the Securities and Exchange
Commission on June 1, 1998.
99.2 Pro Forma Combined Condensed Financial Statements (unaudited) of
Infotel Technologies (Pte) Ltd and NHancement Technologies Inc.
as of March 31, 1998, for the nine months ended March 31, 1998
and for the year ended December 31, 1997, incorporated by
reference to pages PF-1 to PF-8 of pre-effective Amendment No. 1
to the Company's Registration Statement on Form S-3 (Commission
File No. 333-52709), as filed with the Securities and Exchange
Commission on June 1, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NHancement Technologies Inc.
Date: July 6, 1998 By: /s/ Douglas S. Zorn
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Douglas S. Zorn, Executive Vice President
and Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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2.1 Agreement relating to the sale and purchase of 500,000 ordinary
shares in the capital of Infotel Technologies (Pte) Ltd
("Infotel"), dated as of January 19, 1998, by and between the
Company and the stockholders of Infotel (the "Sale Agreement"),
incorporated by reference to the document bearing the same
exhibit number as contained in the Company's Registration
Statement on Form S-3 (Commission File No. 333-52709), as
initially filed with the Securities and Exchange Commission on
May 14, 1998.
2.2 Letter agreement amending the Sale Agreement, dated as of April
2, 1998, by and between the Company and the stockholders of
Infotel ("Supplement No. 1"), incorporated by reference to the
document bearing the same exhibit number as contained in the
Company's Registration Statement on Form S-3 (Commission File No.
333-52709), as initially filed with the Securities and Exchange
Commission on May 14, 1998.
2.3 Form of letter agreement amending the Sale Agreement, as amended
by Supplement No. 1, dated as of April 22, 1998, by and between
the Company and the stockholders of Infotel ("Supplement No. 2"),
incorporated by reference to the document bearing the same
exhibit number as contained in the Company's Registration
Statement on Form S-3 (Commission File No. 333-52709), as
initially filed with the Securities and Exchange Commission on
May 14, 1998.
2.4 Letter agreement amending the Sale Agreement, as amended by
Supplement No. 1 and Supplement No. 2, dated as of June 22, 1998,
by and between the Company and the stockholders of Infotel.
4.1 Form of certificate evidencing Common Stock, $.01 par value, of
the Company, incorporated by reference to the document bearing
the same exhibit number as contained in Registrant's Registration
Statement on Form SB-2 (Commission File No. 333-15563), as filed
with the Securities and Exchange Commission on November 5, 1996.
10.1 Promissory Note, dated as of June 15, 1998, in the original
principal amount of $375,000, payable by the Company to AMRO
INTERNATIONAL S.A. ("Amro").
10.2 Promissory Note, dated as of June 15, 1998, in the original
principal amount of $375,000, payable by the Company to Endeavour
Capital Fund S.A. ("Endeavour").
10.3 Letter agreement, dated as of June 15, 1998, amending Securities
Purchase Agreement, dated as of April 13, 1998, by and among the
Company, Amro and Endeavour.
10.4 Letter agreement, dated as of June 12, 1998, by and among the
Company, Esmond T. Goei, Douglas S. Zorn and James S. Gillespie.
10.5 Promissory Note, dated as of June 12, 1998, in the original
principal amount of $125,000, payable by the Company to Esmond T.
Goei.
10.6 Promissory Note, dated as of June 12, 1998, in the original
principal amount of $225,000, payable by the Company to Douglas
S. Zorn.
10.7 Promissory Note, dated as of June 12, 1998, in the original
principal amount of $300,000, payable by the Company to James S.
Gillespie.
99.1 Infotel Technologies (Pte) Ltd Audited Financial Statements for
the Years Ended June 30, 1996 and 1997 (with unaudited
information as of March 31, 1998 and for the three and nine
months ended March 31, 1997 and 1998), is incorporated by
reference to pages F-1 to F-20 of pre-effective Amendment No. 1
to the Company's Registration Statement on Form S-3 (Commission
File No. 333-52709), as filed with the Securities and Exchange
Commission on June 1, 1998.
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99.2 Pro Forma Combined Condensed Financial Statements (unaudited) of
Infotel Technologies (Pte) Ltd and NHancement Technologies Inc.
as of March 31, 1998, for the nine months ended March 31, 1998
and for the year ended December 31, 1997, incorporated by
reference to pages PF-1 to PF-8 of pre-effective Amendment No. 1
to the Company's Registration Statement on Form S-3 (Commission
File No. 333-52709), as filed with the Securities and Exchange
Commission on June 1, 1998.
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