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
Date of Report (Date of earliest event reported): SEPTEMBER 25, 1998
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ITC LEARNING CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 0-13741 52-1078263
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
13515 Dulles Technology Drive
Herndon, Virginia 20171
- ----------------- -----
(Address of Principal Executive Offices) (Zip Code)
(703) 713-3335
(Registrant's telephone number, including area code)
NONE
(Former name and address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On September 25, 1998, ITC Canada Limited ("ITC Canada"), a wholly owned
and newly formed subsidiary of ITC Learning Corporation ("ITC Learning"),
acquired substantially all of the assets and the business of Mentor Networks
Inc. and its wholly owned subsidiary, High Performance Group (collectively,
"Mentor"), of Halifax, Nova Scotia, Canada. Mentor has engaged since 1993 in the
development and distribution of multi-media interactive courseware products for
the corporate educational market.
ITC Learning invested U.S. $1 million in Mentor in January of 1998 in
exchange for 8% of Mentor's outstanding common stock and the option to acquire
an additional 12% through the exercise of warrants. At that time, ITC Learning
and Mentor also entered into a reseller agreement awarding ITC Learning a
one-year exclusive right to distribute Mentor PC Skills Products in the United
States. In June, ITC Learning and Mentor amended the reseller agreement,
extending it to three years. ITC Learning also agreed to prepay U.S. $300,000 to
Mentor under the reseller agreement and gave up its option to acquire additional
Mentor common stock, in exchange for an improved pricing scheme under the
reseller agreement.
On July 20, 1998, Mentor was placed into receivership by its secured
lender, the Nova Scotia Business Development Corporation ("NSBDC"). Based on ITC
Learning's familiarity with Mentor's products, the existing relationship between
ITC Learning and Mentor under the reseller agreement, the substantial
integration of Mentor's products into ITC Learning's library, ITC Learning's
desire to assure continued and expanded access to Mentor products and ITC
Learning's due diligence investigation subsequent to the receivership, ITC
Learning submitted a bid to purchase the assets and business of Mentor.
Under the agreement reached with the NSBDC, ITC Canada purchased the
assets and business of Mentor for Cdn. $1 million of cash (approximately U.S.
$661,000) and a five-year promissory note at 8% interest payable to the NSBDC in
the amount of Cdn. $2 million (approximately U.S. $1,320,000), plus an agreement
to pay up to Cdn. $1.6 million (approximately U.S. $1,058,000) in certain future
royalty payments based on the ongoing performance of the Mentor assets. As part
of the transaction, ITC Learning also committed to provide ITC Canada with
working capital up to Cdn. $1.1 million (approximately US $727,000). (The U.S.
equivalent for all amounts shown as payable are at current exchange rates and
the actual amount paid in U.S. dollars may be different depending upon
fluctuations in exchange rates.)
The Mentor assets will be combined with ITC Learning's Toronto-based
sales and marketing office and will be operated by ITC Canada. The source of the
funds required to consummate the Mentor acquisition were derived from ITC
Learning's working capital and its line of credit with Wachovia Bank, N.A.
2
As a result of the acquisition, ITC Canada acquired 42 employees, 34 of
whom are technical development personnel. ITC Canada also acquired seven PC
Skills titles associated with the Microsoft Office Suite(TM) of products, three
call center titles, intellectual property rights to an additional 25 soft skills
products and certain fixed assets. Following the acquisition, ITC Learning will
continue to use these assets to develop and distribute multimedia courseware for
corporate North America.
A copy of ITC Learning's press release issued on September 29, 1998, is
attached and incorporated herein.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
It is impracticable to provide the required financial statements at the time of
this report. However, the required financial statements will be filed not later
than 60 days after the filing of this report.
(b) Pro Forma Financial Information
It is impracticable to provide the required pro forma financial information at
the time of this report. However, the required pro forma financial information
will be filed not later than 60 days after the filing of this report.
(c) Exhibits
DESCRIPTION EXHIBIT
Assignment of Rights Under Offer from 2.1
ITC Learning Corporation to ITC Canada
Limited dated September 1, 1998
Receiver's Bill of Sale from Grant 2.2
Thornton Limited to ITC Canada Limited
dated September 16, 1998
Assignment of Lease from Grant 2.3
Thornton Limited to ITC Canada Limited
dated September 16, 1998
Assignments of Courseware from Grant 2.4
Thornton Limited to ITC Canada Limited
dated September 16, 1998
Assignments of Intellectual Property 2.5
Rights from Grant Thornton Limited to
ITC Canada Limited dated September 16,
1998
4
Assignment of Trademarks from Grant 2.6
Thornton Limited to ITC Canada Limited
dated September 23, 1998
Principal Agreement between ITC Canada 2.7
Limited and Nova Scotia Business
Development Corporation dated
September 16, 1998
Promissory Note in the Amount of Cdn. 2.8
$2,000,000 Executed by ITC Canada
Limited dated September 16, 1998
Demand Debenture between ITC Canada 2.9
Limited and Nova Scotia Business
Development Corporation dated
September 18, 1998
Debenture Pledge Agreement in the 2.10
Amount of Cdn. $3,600,000 between ITC
Canada Limited and Nova Scotia
Business Development Corporation dated
September 18, 1998
General Security Agreement between ITC 2.11
Canada Limited and Nova Scotia
Business Development Corporation dated
September 18, 1998
Guarantee of Obligation by ITC 2.12
Learning Corporation dated September
22, 1998
Agreement between ITC Learning 2.13
Corporation and Nova Scotia Business
Development Corporation dated
September 22, 1998
Royalty Agreement among ITC Canada 2.14
Limited, ITC Learning Corporation and
Grant Thornton Limited dated September
18, 1998
5
Inter-Lender Agreement among ITC 2.15
Canada Limited, Nova Scotia Business
Development Corporation and Wachovia
Bank, N.A. dated September 23, 1998
ITC Learning Corporation Press Release 99.1
dated September 29, 1998
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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 hereunto duly authorized.
ITC LEARNING CORPORATION
BY /s/ CARL D. STEVENS
(Carl D. Stevens, President and
Chief Executive Officer)
EXHIBIT LIST
DESCRIPTION EXHIBIT
Assignment of Rights Under Offer from 2.1
ITC Learning Corporation to ITC Canada
Limited dated September 1, 1998
Receiver's Bill of Sale from Grant 2.2
Thornton Limited to ITC Canada Limited
dated September 16, 1998
Assignment of Lease from Grant 2.3
Thornton Limited to ITC Canada Limited
dated September 16, 1998
Assignments of Courseware from Grant 2.4
Thornton Limited to ITC Canada Limited
dated September 16, 1998
Assignments of Intellectual Property 2.5
Rights from Grant Thornton Limited to
ITC Canada Limited dated September 16,
1998
Assignment of Trademarks from Grant 2.6
Thornton Limited to ITC Canada Limited
dated September 23, 1998
Principal Agreement between ITC Canada 2.7
Limited and Nova Scotia Business
Development Corporation dated
September 16, 1998
Promissory Note in the Amount of Cdn. 2.8
$2,000,000 Executed by ITC Canada
Limited dated September 16, 1998
Demand Debenture between ITC Canada 2.9
Limited and Nova Scotia Business
Development Corporation dated
September 18, 1998
Debenture Pledge Agreement in the 2.10
Amount of Cdn. $3,600,000 between ITC
Canada Limited and Nova Scotia
Business Development Corporation dated
September 18, 1998
General Security Agreement between ITC 2.11
Canada Limited and Nova Scotia
Business Development Corporation dated
September 18, 1998
Guarantee of Obligation by ITC 2.12
Learning Corporation dated September
22, 1998
Agreement between ITC Learning 2.13
Corporation and Nova Scotia Business
Development Corporation dated
September 22, 1998
Royalty Agreement among ITC Canada 2.14
Limited, ITC Learning Corporation and
Grant Thornton Limited dated September
18, 1998
Inter-Lender Agreement among ITC 2.15
Canada Limited, Nova Scotia Business
Development Corporation and Wachovia
Bank, N.A. dated September 23, 1998
ITC Learning Corporation Press Release 99.1
dated September 29, 1998