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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
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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 31, 1997
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WHEELS SPORTS GROUP, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 0-22321 56-2007717
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
149 GASOLINE ALLEY DRIVE
MOORESVILLE, NORTH CAROLINA 28115
(Address of principal executive offices)
(704) 662-6442
(Registrant's telephone number, including area code)
1368 SALISBURY ROAD
MOCKSVILLE, NORTH CAROLINA 27028
(Former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 31, 1997, Wheels Sports Group, Inc. (the "Company")
closed on its acquisition of Press Pass Partners, a Delaware general
partnership which manufactures and markets collectible sports trading cards,
primarily for the NASCAR market ("Press Pass"). The acquisition was completed
on December 31, 1997, on the terms summarized below and substantially as
disclosed in the Company's Form 8-K as filed on October 17, 1997.
The acquisition was completed through the merger of the two
corporate partners of Press Pass into newly formed subsidiaries of the Company
(the "Subsidiaries"). The consideration paid by the Company pursuant to the
Agreement consisted of cash in the amount of $3.1 million; 600,000 shares of
the Company's Common Stock; and promissory notes in the aggregate principal
amount of $1 million (the "Notes"). The Notes are secured by the assets of
Press Pass, are guaranteed by the Subsidiaries and bear interest at 8% per
annum. Principal and interest are due December 31, 1998, subject to prepayment
at the Company's option; provided, however, that the Company may make quarterly
payments of interest only, in which case the Notes bear interest at the rate of
4% per annum. The shares of Common Stock were issued without registration
under the Securities Act of 1933 (the "Act"), and the Company granted
"piggyback" registration rights to the holders of the Common Stock. The
Company also entered into employment agreements with two executives of Press
Pass, Victor H. Shaffer and Robert Bove. In addition, Mr. Shaffer was
appointed to the Company's Board of Directors.
In order to fund the cash payment, the Company obtained a credit
facility with Credit Agricole Indosuez on December 31, 1997. See "ITEM 5.
Other Events."
ITEM 5. OTHER EVENTS
On December 31, 1997, the Company established a credit facility
with Credit Agricole Indosuez (the "Credit Facility"). The Credit Facility
provides the Company with a $7.7 million term loan and up to $10 million in
revolving loans. The availability of revolving loans is determined by a
borrowing base comprised of eligible inventories and accounts receivable.
Borrowings under the Credit Facility are secured by substantially all of the
Company's assets.
Subject to certain mandatory and voluntary prepayments, the term loan
provides for quarterly payments of principal and interest commencing in
December 1998 and ending in September 2003, and all revolving loans are payable
in December 2002.
At the December 31, 1997 closing under the Credit Facility, the
Company obtained a $7.7 million term loan and $1.5 million in revolving loans.
The revolving loan proceeds, together with certain existing funds of the
Company, were used to repay $2.1 million in outstanding secured debt. The term
loan proceeds were used to fund the cash payment made in the Press Pass
acquisition (as described in ITEM 2 above); to pay certain expenses incurred in
connection with the Credit Facility and the acquisition of Press Pass and High
Performance Sports Marketing, Inc. ("High Performance"); and to fund a $3.3
million escrow account. Upon the occurrence of certain events, the funds held
in escrow will be released to the former
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shareholders of High Performance in payment of the remaining cash purchase
price incurred in the High Performance acquisition.
In connection with the Credit Facility, the Company granted to Credit
Agricole Indosuez a warrant to purchase 509,358 shares of Common Stock at a
price of $3.50 per share. The warrant is exercisable from March 31, 1998 to
December 31, 2007; provided, however, that if the Company completes its
previously announced merger with Racing Champions Corporation by March 31,
1998, then the warrant shall be cancelled. The Company has the right to extend
the March 31, 1998 date to April 30, 1998 upon the payment of $100,000. The
Company has granted "piggyback" and demand registration rights to the holder of
the warrant. The Company will generally bear the cost of any such
registration.
FORWARD LOOKING STATEMENTS
The statements contained in this report that are not purely
historical are forward looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Company's expectations, hopes,
intentions or strategies regarding the future. Forward looking statements
include expectations of trends to continue through the remainder of the
forthcoming year. Forward looking statements involve a number of risks and
uncertainties. Among other factors that would cause actual results to differ
materially are the following: the inability to obtain the long-term financing
described above; the inability to close other acquisitions which may be
undertaken by the Company, including but not limited to the previously
announced acquisition of Press Pass Partners; business conditions and growth in
the markets for collectible sports trading cards and other NASCAR related
merchandise; competitive factors, such as the entry of new competitors into the
NASCAR trading card and merchandise markets; the loss of license agreements
with certain NASCAR drivers or team owners; inventory risks due to shifts in
market demand; changes in product mix; and the risk factors listed from time to
time in the Company's SEC reports, including but not limited to the Company's
reports on Form 10-QSB, 8-K, 10-KSB, Annual Reports to Shareholders, and
reports or other documents filed pursuant to the Securities Act of 1933 or the
Securities Exchange Act of 1934. All forward looking statements included
herein are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward looking
statements. It is important to note that the Company's actual results could
differ materially from those in such forward looking statements due to the
factors cited above. As a result of these factors, there can be assurance the
Company will not experience material fluctuations in future operating results
on a quarterly or annual basis, which would materially and adversely affect the
Company's business, financial condition and results of operations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) It is impracticable to provide the required financial
statements for Press Pass Partners at this time. In accordance with Item
7(a)(1) of Form 8-K, the Company will file the required financial statements as
an amendment to this Form 8-K as soon as practicable, but not
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later than 60 days after the date on which this report on Form 8-K must be
filed.
(b) It is impracticable to provide the required pro forma
financial information for Press Pass Partners and the Company at this time. In
accordance with Item 7(b)(2) of Form 8-K, the Company will file the required
pro forma financial information as an amendment to this Form 8-K as soon as
practicable, but not later than 60 days after the date on which this report on
Form 8-K must be filed.
(c) The following exhibits are furnished herewith in accordance
with the provisions of Item 601 of Regulation S-K:
Reg. S-K
Exhibit No. Description Item No.
- ----------- ----------- --------
* 2.4 Merger Agreement and Plan of Reorganization among SM Acquisition 2
Company, J/B Acquisition Company, Wheels Sport Group, Inc.,
Synergy Marketing, Inc. and J/B Press Pass, Inc., dated
October 3, 1997.
o2.4.1 Amendment to Merger Agreement and Plan of Reorganization 2
among SM Acquisition Company, J/B Acquisition Company,
Wheels Sport Group, Inc., Synergy Marketing, Inc. and
J/B Press Pass, Inc., dated December 29, 1997.
o2.4.2 Registration Rights Agreement, dated December 31, 1997, by and 2
among the Company and the shareholders of the partners of Press
Pass.
o10.1.12 Employment Agreement, dated October 3, 1997 and effective 10
December 31, 1997, by and between Victor Shaffer and the Company.
o10.1.13 Employment Agreement, dated October 3, 1997 and effective 10
December 31, 1997, by and between Robert Bove and the Company.
o10.15.4 Form of Promissory Note, issued in the aggregate principal 10
amount of $1,000,000, dated December 31, 1997, from the Company to
shareholders of Synergy Marketing, Inc. and J/B Press Pass, Inc.
+10.16.1 Credit Agreement, dated December 31, 1997, among the Company 10
and Credit Agricole Indosuez, as agent, and the lending
institutions named therein.
+10.16.2 Warrant, dated December 31, 1997, granted by the Company to 10
Credit Agricole Indosuez, to purchase up to 509,358 shares of
Common Stock.
* Previously filed with the Company's Form 8-K filed on October 17, 1997.
o Filed herewith.
+ To be filed by amendment.
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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.
WHEELS SPORTS GROUP, INC.
Date: January 15, 1998 By: /s/ Howard L. Correll, Jr.
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Howard L. Correll, Jr., Chairman of the
Board, Chief Executive
Officer and President
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EXHIBIT INDEX
Reg. S-K
Exhibit No. Description Item No.
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* 2.4 Merger Agreement and Plan of Reorganization among SM Acquisition 2
Company, J/B Acquisition Company, Wheels Sport Group, Inc.,
Synergy Marketing, Inc. and J/B Press Pass, Inc., dated
October 3, 1997.
o2.4.1 Amendment to Merger Agreement and Plan of Reorganization 2
among SM Acquisition Company, J/B Acquisition Company,
Wheels Sport Group, Inc., Synergy Marketing, Inc. and
J/B Press Pass, Inc., dated December 29, 1997.
o2.4.2 Registration Rights Agreement, dated December 31, 1997, by and 2
among the Company and the shareholders of the partners of Press
Pass.
o10.1.12 Employment Agreement, dated October 3, 1997 and effective 10
December 31, 1997, by and between Victor Shaffer and the Company.
o10.1.13 Employment Agreement, dated October 3, 1997 and effective 10
December 31, 1997, by and between Robert Bove and the Company.
o10.15.4 Form of Promissory Note, issued in the aggregate principal 10
amount of $1,000,000, dated December 31, 1997, from the Company to
shareholders of Synergy Marketing, Inc. and J/B Press Pass, Inc.
+10.16.1 Credit Agreement, dated December 31, 1997, among the Company 10
and Credit Agricole Indosuez, as agent, and the lending
institutions named therein.
+10.16.2 Warrant, dated December 31, 1997, granted by the Company to 10
Credit Agricole Indosuez, to purchase up to 509,358 shares of
Common Stock.
* Previously filed with the Company's Form 8-K filed on October 17, 1997.
o Filed herewith.
+ To be filed by amendment.