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) December 27, 1995
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Alpharel, Inc.
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(Exact name of registrant as specified in charter)
California 0-15935 95-3634089
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(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
9339 Carroll Park Drive, San Diego, California 92121
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (619) 625-3000
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Not applicable
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(Former name or former address, if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Alpharel, Inc., a California corporation (the "Company"),
previously entered into a letter of intent dated November 20, 1995 (the
"Letter of Intent") with Jay Tanna, the founder and Managing Director of
Trimco Group plc, a United Kingdom company ("Trimco"), and Document
Management Systems Limited, a company affiliated with Mr. Tanna, providing
for the purchase of all of the outstanding shares of Trimco. This
acquisition has now been completed, pursuant to a Sale and Purchase Agreement
dated as of December 27, 1995 by and among the Company, Mr. Tanna and the
shareholders of Trimco (the "Agreement").
Pursuant to the Agreement, the Company has acquired the Trimco
shares for an aggregate purchase price of approximately $14,650,000,
comprised of $5,550,000 in cash, 1,614,189 shares of Company common stock and
a promissory note in the principal amount of $1,000,000. The shares of
common stock were issued to the Trimco shareholders, none of whom are
residents of the United States, in reliance on the exemption set forth in
Regulation S ("Regulation S") of the Securities and Exchange Commission from
the registration requirements of the Securities Act of 1933 (the "Act").
The promissory note issued in connection with the transaction bears
interest at the rate of 7% per annum and is due on September 27, 1996. The
note is convertible into common stock at a rate of $4.00 per share, or an
aggregate of 250,000 shares. The Company has agreed that, within 30 days of
the consummation of the transaction, it will provide the holder of the note
with a second-priority lien on its assets, subject to the first-priority lien
of the Company's existing revolving term loan note. The note has also been
issued in reliance on the exemption set forth in Regulation S.
A total of $3,450,000 of the cash component of the consideration
for the acquisition has been provided by the issuance of a new series of
preferred stock, the Series B Convertible Preferred Stock (the "Series B
Preferred Stock"). The Company issued an aggregate of 172,500 shares of
Series B Preferred Stock in a private placement to two purchasers, neither of
whom is a resident of the United States, in reliance on the exemption set
forth in Regulation S. The Series B Preferred Stock bears a dividend of 8%
per annum, accruing quarterly, and is convertible into shares of common stock
after February 10, 1996, at the option of the holders, and after April 18,
1996, at the option of the Company. The conversion ratio will be a fraction,
the numerator of which is $20.00 plus accrued but unpaid dividends, and the
denominator of which is the lesser of $5.19 (the closing price on December
19, 1995, the date preceding the date of issuance), and 82.5% of the average
of closing trading price on the three trading days immediately preceding the
date of the conversion. In the event that, on any conversion date, the
applicable conversion price then in effect is such that the aggregate number
of shares of common stock that would then be issuable upon conversion of all
shares of the Series B Preferred Stock would equal or exceed 1,070,000
shares, then the Company shall be obligated to convert only a portion of such
shares subject to a notice of conversion, and will be obligated to redeem the
remainder of the shares subject to such notice of conversion out of funds
legally available for such redemption. The Certificate of Determination for
the Series B Preferred Stock also contains customary anti-dilution provisions.
The remainder of the cash component of the consideration for the
transaction was provided from the Company's available cash.
The Company intends to make cash expenditures of approximately
$1,000,000 and to issue shares of Company common stock having a value of
approximately $550,000 (at the time of closing) to provide incentives to
Trimco personnel to remain in Trimco's employ after the closing and to
facilitate the integration of the operations of the Company and Trimco.
Trimco was incorporated in 1988 in the United Kingdom and has its
principal offices in Ealing, London in the United Kingdom. Trimco has
developed a line of software products for the capture,
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viewing, mark-up editing, storage, distribution and workflow management of
documents. Trimco's products focus on applications involving technical
documents such as engineering drawings and blueprints, although many of
Trimco's customers also use Trimco's products in managing and manipulating
office documents and electronic files. The products are marketed primarily
through value-added resellers (VARs), distributors and systems integrators,
although Trimco has successfully pursued direct business with end-user
clients, particularly for larger and more complex installations of its
software.
The Company anticipates that Mr. Tanna will remain with the Company
as Managing Director of Trimco Operations. The Company anticipates that Mr.
Tanna will, in addition, be appointed Executive Vice President and a Director
of the Company. The loss of the services of Mr. Tanna in the future would
have an adverse effect on Trimco's operations and prospects. Entities
affiliated with Mr. Tanna received approximately 70% of the shares of Company
common stock issued to Trimco shareholders. These affiliated entities now
hold 1,175,511 shares, or approximately 7% of the Company's outstanding
shares. Mr. Tanna has agreed that no more than 12.5% of the shares issued to
such entities will be sold in each three-month period after the consummation
of the acquisition.
The amount of the consideration for the transaction was determined
by arm's-length negotiations between the Company and the shareholders of
Trimco.
Prior to the transaction there were no material relationships
between Trimco and the Company, or any of its affiliates, any director or
officer of the Company, or any associate of any such director or officer.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired:
Audited Consolidated Financial Statements of Trimco Group, plc:
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Consolidated Profit and Loss Account for the years
ended June 30, 1994 and 1993 (1)
Consolidated Balance Sheets at June 30, 1994 and
1993 (1)
Consolidated Statement of Total Recognized Gains and
Losses for the years ended June 30, 1994 and 1993 (1)
Consolidated Cash Flow Statement for the years ended
June 30, 1994 and 1993 (1)
Notes to the Accounts for the year ended June 30,
1994 (1)
Auditors Report to the Members of Trimco Group, plc (1)
Consolidated Profit and Loss Account for the years
ended June 30, 1995 and 1994 (1)
Consolidated Balance Sheets at June 30, 1995 and
1994 (1)
Consolidated Statement of Total Recognized Gains and
Losses for the years ended June 30, 1995 and 1994 (1)
Consolidated Cash Flow Statement for the years ended
June 30, 1995 and 1994 (1)
Notes to the Accounts for the year ended June 30,
1995 (1)
Auditors Report to the Members of Trimco Group, plc (1)
Report of the Auditors to the Directors of Trimco
Group, plc (2)
Unaudited Consolidated Financial Statements of Trimco Group, plc(3):
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Consolidated Profit and Loss Account for the three
months ended September 30, 1995
Consolidated Balance Sheet at September 30, 1995
Consolidated Cash Flow Statement for the three months
ended September 30, 1995
Notes to the Accounts for the three months ended
September 30, 1995
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(b) Pro Forma Financial Information:
It is impracticable to provide the required pro
forma financial information at the time of filing of
this Current Report on Form 8-K. The required pro
forma financial information will be filed as soon as
it is available, but in no event later than 60 days
after the date this Current Report on Form 8-K was
due to be filed.
(c) Exhibits:
2.1 Purchase and Sale Agreement dated December 27,
1995 by and between the Company, Mr. Tanna and
the shareholders of Trimco Group, plc.
2.2 Convertible Loan Note dated December 27, 1995
issued by the Company.
4.1 Certificate of Determination of the Series B
Convertible Preferred Stock.
4.2 Convertible Preferred Stock Purchase Agreement
dated December 20, 1995 by and between the
Company and Newsun Limited.
4.3 Convertible Preferred Stock Purchase Agreement
dated December 20, 1995 by and between the
Company and THC, Inc.
4.4 Form of Certificate representing the Series B
Convertible Preferred Stock.
4.5 Letter Agreement dated January 2, 1996 by and
among the Company, Newsun Limited and THC, Inc.
23.1 Consent of Independent Accountants.
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(1) Filed as Exhibit 99.1 to the Company's Current
Report on Form 8-K dated November 20, 1995 and
incorporated herein by this reference.
(2) Attached hereto as page F-1.
(3) Attached hereto as pages F-2 through F-5.
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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.
Date: January 9, 1996
ALPHAREL, INC.
By: /s/ STEPHEN GARDNER
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Stephen Gardner, President
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REPORT OF THE AUDITORS TO THE DIRECTORS OF TRIMCO GROUP, PLC
COMPLIANCE WITH AUDITING STANDARDS
We refer to our auditor's reports dated 17 January, 1994, 3 January,
1995 and 17 November, 1995 on the financial statements of Trimco Group PLC
for the years ended 30 June 1993, 1994 and 1995, respectively.
In forming our opinion as regards (ii) below, we have relied on
assurances provided to us by management representatives of both Trimco Group
PLC and Alpharel Inc that, for the accounting periods concerned, there are no
matters of a material nature that would require alternative accounting
treatment or additional disclosure either in the financial statements
referred to above or otherwise in order fully to comply with US generally
accepted accounting principles and auditing standards.
We confirm that:
i) our audit work was performed in accordance with UK generally accepted
auditing standards; and
ii) on the basis of the above, we are of the opinion that our audit was
conducted substantially in accordance with US generally accepted
auditing standards.
/s/ GANE JACKSON SCOTT 22nd December, 1995
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Gane Jackson Scott
F-1
Page 1
TRIMCO GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 30TH SEPTEMBER 1995
30.9.94
L'000 L'000
TURNOVER 1,034 795
Cost of Sales 270 442
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GROSS PROFIT 764 353
Administrative Expenses 1,025 690
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OPERATING (LOSS)/PROFIT (261) (337)
Interest Receivable - -
Interest Payable - -
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(LOSS)/PROFIT ON ORDINARY
ACTIVITIES BEFORE TAXATION (261) (337)
Taxation - -
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(LOSS)/PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION (261) (337)
Dividends - -
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RETAINED PROFIT FOR THE
FINANCIAL YEAR (261) (337)
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The notes from page 4 form part of these accounts.
F-2
Page 2
TRIMCO GROUP PLC
CONSOLIDATED BALANCE SHEET
AT 30TH SEPTEMBER, 1995
30.6.95
L'000 L'000 L'000 L'000
FIXED ASSETS
Tangible Assets 619 596
CURRENT ASSETS
Stock 74 78
Debtors 1,418 1,945
Cash at Bank 106 316
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1,598 2,342
CURRENT LIABILITIES
CREDITORS:
Amounts falling due within one year (1,584) (2,024)
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NET CURRENT ASSETS 14 318
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TOTAL ASSETS LESS CURRENT
LIABILITIES 633 914
CREDITORS:
Amounts falling due after more than
one year - -
PROVISIONS FOR LIABILITIES
AND CHARGES
Deferred tax 35 35
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668 949
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CAPITAL AND RESERVES
Called up Share Capital 370 370
Reserves 298 579
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668 949
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The notes from page 4 form part of these accounts.
F-3
Page 3
TRIMCO GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD ENDED 30TH SEPTEMBER, 1995
30.9.95
L'000 L'000 L'000 L'000
NET CASH INFLOW FROM OPERATING 340 404
ACTIVITIES
RETURN ON INVESTMENTS AND SERVICING OF
FINANCE
Interest received - -
Interest paid - (2)
Interest element of finance lease payments - -
Dividends paid - -
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NET CASH OUTFLOW FROM RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE - (2)
TAXATION
Tax paid - -
INVESTING ACTIVITIES
Purchase of fixed assets (39) (40)
Proceeds of sale of fixed assets - -
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NET CASH OUTFLOW FROM INVESTING
ACTIVITIES (39) (40)
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NET CASH INFLOW/(OUTFLOW)
BEFORE FINANCING (379) 362
FINANCING
Repayment of loans - -
Capital element of hire purchase contracts
and finance leases (2) (2)
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NET CASH (OUTFLOW)/INFLOW FROM
FINANCING (2) (2)
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INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS (381) 360
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The notes from page 4 form part of these accounts.
F-4
Page 4
TRIMCO GROUP PLC
NOTES TO THE ACCOUNTS FOR THE THREE MONTHS
ENDED 30TH SEPTEMBER 1995
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated balance sheet of Trimco Group Plc (the
"Company") as of 30th September, 1995 and the consolidated profit and loss
account and cash flow statement for the three month period ended 30th
September, 1995 and 1994 are unaudited. The consolidated financial statements
and related notes have been prepared in accordance with generally accepted
accounting principles applicable to interim periods. In the opinion of
management, the consolidated financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the consolidated financial position, operating results and
cash flows for the periods presented.
NOTES TO THE ACCOUNTS
30TH SEPTEMBER, 1995
DEBTORS
1995 30.9.94
L'000 L'000
Trade debtors 769 1,074
Other debtors 112 22
Amounts owed by group undertakings - -
Prepayments and accrued income 537 230
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1,418 1,326
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CREDITORS
Amounts falling due within one year - -
Loans from 3i and Government loan - 15
Obligations under Hire Purchase Contracts
and Finance Leases 4 19
Bank loans and overdrafts 363 163
Trade creditors 733 42
Corporation tax 79 119
Dividend payable 59 92
Other creditors including taxation &
social security 81 41
Accrued and deferred income 265 672
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1,584 1,963
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F-5
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2.1 Purchase and Sale Agreement dated December 27, 1995 by and
between the Company and, Mr. Tanna and the shareholders of
Trimco Group, plc.
2.2 Convertible Loan Note dated December 27, 1995 issued by the
Company.
4.1 Certificate of Determination of the Series B Convertible
Preferred Stock.
4.2 Convertible Preferred Stock Purchase Agreement dated
December 20, 1995 by and between the Company and THC, Inc.
Limited.
4.3 Convertible Preferred Stock Purchase Agreement dated
December 20, 1995 by and between the Company and Newsun Limited.
4.4 Form of Certificate representing the Series B Convertible
Preferred Stock.
4.5 Letter Agreement dated January 2, 1995 by and among the
Company, Newsun Limited and THC, Inc.
23.1 Consent of Independent Accountants.