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 Commission File Number:
event reported): 1-10210
AUGUST 23, 1999
eGLOBE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3486421
(State or other jurisdiction (IRS Employer
of incorporation) Identification Number)
1250 24TH STREET, N.W., SUITE 725
WASHINGTON, D.C. 20037
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(202) 822-8981
(Former name or former address, if changed since last report)
NOT APPLICABLE
eGLOBE, INC.
ITEM 5 OTHER EVENTS
GENERAL
This is the second in a series of public filings with the SEC
that eGlobe, Inc. ("the Company") is making in compliance with Nasdaq
requirements regarding the listing of the Company on the Nasdaq National Market.
The first filing was a Form 8-K filed with the SEC on September 3, 1999; a
fuller explanation of the facts and circumstances surrounding the Nasdaq filing
requirement is included in the September 8-K, along with pertinent
correspondence between Nasdaq and the Company. The 8-K filed by the Company on
September 3, 1999 is incorporated herein by reference. Nasdaq does not obligate
the Company to amke additional 8-K filings.
LISTING ON THE NASDAQ NATIONAL MARKET
In order to maintain its listing on the Nasdaq National
Market, Nasdaq requires that the Company make a public filing with the SEC on
October 15, 1999 which includes an August 31, 1999 unaudited condensed
consolidated balance sheet which evidences, on a pro forma basis, a minimum of
$20 million of net tangible assets.
In the opinion of the Company and its advisors, the unaudited
pro forma condensed consolidated balance sheet included in this Form 8-K meets
the $20 million net tangible asset requirement. In consequence, the Company
assumes that with this filing it has met all of the higher standards imposed on
it by Nasdaq. There is no assurance, however, that Nasdaq will not differ with
the Company or impose subsequent or additional requirements. If the Company
is unable to meet any requirement, the Company's Common Stock likely would be
transferred to the Nasdaq Small Cap Market or the OTC Bulletin Board. Such an
event could impair the liquidity of the Common Stock, subject it to price
fluctuations, and make future financings or acquisitions by the Company more
difficult.
RECENT TRANSACTIONS
Acquisition of Transaction Support Services and Call Center. On
September 20, 1999 the Company acquired control of Oasis Reservations Services,
Inc. ("ORS"), a Miami-based transaction support services and call center, from
its sole stockholder, Outsourced Automated Services ("Oasis"). ORS provides
customer care and transaction support services employing both Internet access
and traditional telephone access. ORS supplies outsource services to the travel
industry and to eCommerce providers.
The Company and Oasis formed eGlobe/Oasis Reservations LLC, a limited
liability company (the "LLC"), which is responsible for conducting ORS' business
operations. The Company manages and controls the LLC and receives 90% of the
profits and losses from ORS' business. The LLC was funded by contributions
effected by the members under a Contribution Agreement, dated as of September
15, 1999 (the "Contribution Agreement"). The Company
issued 1.5 million shares of its Common Stock, valued at $3 million on the date
of issuance, as its contribution to the LLC. In addition, the Company
contributed certain contingent warrants to purchase additional shares of Company
Common Stock to the LLC. Oasis contributed its shares of stock in ORS valued at
$2.3 million to the LLC. The acquisition was accounted for using the purchase
accounting method of accounting. The preliminary purchase price allocation
reflects the preliminary estimates of the fair value of the assets acquired and
liabilities assumed based on management's review and third-party appraisals. The
final purchase price allocation will be determined as additional information
becomes available. See Form 8-K filed on October 5, 1999 for greater detail on
this acquisition.
Acquisition of telecommunications infrastructure supplying Latin America. On
October 14, 1999, the Company acquired iGlobe, Inc. ("iGlobe"), a wholly owned
subsidiary of Highpoint Telecommunications, Inc. Recently established by
Highpoint, iGlobe has created an infrastructure supplying telecommunications
services, including Internet Protocol ("IP") Services, particularly Voice over
IP ("VoIP"), throughout Latin America. With this purchase, the Company acquires
critical operating capabilities: licenses to operate in four Latin American
countries, twelve reciprocal operating agreements with Latin American carriers,
a teleport in Mountain View, California, a transponder lease with coverage of
Latin America, and long term leases for international fiber optic cable;
international gateway switches located in New York, Los Angeles and Denver, a
carrier billing system and IP operating systems compatible with those currently
utilized by the Company. iGlobe's network in Latin America complements the
network the Company is building in Asia and the rest of the world. The Company
purchased iGlobe with convertible preferred stock that is convertible into
approximately 3.77 million shares of Company Common Stock after one (1) year.
Additionally, the Company assumed approximately $2.8 million of liabilities.
This transaction will be reflected in a separate 8-K filing within 15 days of
the closing date. The acquisition was accounted for using the purchase method
of accounting. The preliminary purchase price allocation reflects the
preliminary estimates of the fair value of the assets acquired and liabilities
assumed based on management's review and preliminary third-party appraisals.
The final purchase price allocation will be determined as additional information
becomes available.
Addition of New Capital. The Company is raising additional equity through the
sale of convertible preferred stock to accredited investors, as defined by the
Securities Exchange Act of 1934. $2 million has been received in the first
closing in this series of convertible preferred stock. The Securities will pay a
dividend, annually in arrears, at a fixed rate per annum of 8%. Dividends may be
paid in cash or stock at the option of the Investor or, if the investor makes no
choice, at the option of the Company. For the purposes of determining the value
of any common stock issued for the payment of dividends, the market price per
share of the common stock of eGlobe at the time of dividend payment will be
used.
The Holders of the preferred stock shall have the right at any time to convert
the preferred stock into shares of Common Stock of eGlobe. The stock converts at
a percentage of market price at the date of conversion but within in a range
between 101% and 150% of market price at the time the preferred is purchased.
The Securities shall automatically convert into shares of Common Stock of eGlobe
upon any one of the following events: the Common Stock of eGlobe trades at or
above a price per share of $6
for 15 consecutive trading days; eGlobe completes a public offering of equity
securities with proceeds in excess of $25 million.
Goodwill Adjustments based on asset appraisals of acquisitions. The Company has
obtained appraisals from independent appraisers of the assets of IDX
International, Inc. ("IDX") and UCI Tele Networks, Ltd. ("UCI"). These companies
were acquired in December 1999 and the preliminary purchase price allocations
were subject to final appraisals as well as the resolution of certain
contingencies. These appraisals resulted in a net reclassification of
approximately $4.9 million of IDX goodwill and $0.6 million of UCI goodwill to
other identifiable intangibles. These reclassifications are reflected on the
August 1999 unaudited condensed consolidated balance sheet. The final purchase
price allocations are still subject to the resolution of certain contingencies.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
eGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF AUGUST 31, 1999
eGlobe
As of 8/31/99 Adjustments Pro Forma
-------------- ------------- ----------
ASSETS
CURRENT
Cash and cash equivalents $ 1,671,000 $ 2,003,000 (1),(3) $ 3,674,000
Accounts receivable, net 8,284,000 483,000 (1) 8,767,000
Other current assets 1,310,000 1,092,000 (1),(2) 2,402,000
------------- ------------ ------------
TOTAL CURRENT ASSETS 11,265,000 3,878,000 14,843,000
------------- ------------ ------------
PROPERTY AND EQUIPMENT, NET 17,853,000 6,248,000 (1),(2) 24,101,000
GOODWILL, NET 8,284,000 1,496,000 (2) 9,780,000
OTHER INTANGIBLES, NET 16,633,000 4,400,000 (1),(2) 21,033,000
OTHER ASSETS 1,450,000 1,950,000 (2) 3,400,000
------------- ------------ ------------
TOTAL ASSETS $ 55,485,000 $ 17,972,000 $ 73,157,000
------------- ------------ ------------
LIABILITIES, REDEEMABLE PREFERRED STOCK, MINORITY INTEREST IN LLC AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,734,000 $ 415,000 (1),(2) $ 8,149,000
Accrued expenses 8,009,000 - 8,009,000
Notes payable principally related to acquisitions 1,125,000 - 1,125,000
Note payable and current maturities of long-term debt 7,286,000 1,251,000 (2),(4) 8,537,000
Other current liabilities 2,637,000 546,000 (1),(2) 3,183,000
------------- ------------ ------------
TOTAL CURRENT LIABILITIES 26,791,000 2,212,000 29,003,000
------------- ------------ ------------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 8,586,000 (331,000)(2),(4) 8,255,000
------------- ------------ ------------
TOTAL LIABILITIES 35,377,000 1,881,000 37,258,000
------------- ------------ ------------
REDEEMABLE PREFERRED STOCK 3,036,000 (3,036,000)(5) -
------------- ------------ ------------
MINORITY INTEREST IN LLC ___ 2,268,000 (1) 2,268,000
------------- ------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock 2,000 - 2,000
Common stock 21,000 - 21,000
Additional paid-in capital 67,513,000 18,679,000 (6) 86,192,000
Stock to be issued 4,269,000 - 4,269,000
Accumulated deficit (54,922,000) (2,120,000)(6) (57,042,000)
Accumulated other comprehensive loss 189,000 ___ 189,000
------------- ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 17,072,000 16,859,000 33,631,000
------------- ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 55,485,000 $ 17,972,000 $ 73,157,000
------------- ------------ ------------
See notes to the unaudited pro forma condensed consolidated balance sheet.
eGLOBE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
The transactions described in Item 5, "Other Transactions," are discussed below:
(a) On September 20, 1999 the Company acquired control of Oasis Reservations
Services, Inc. ("ORS"), a Miami-based transaction support services and call
center, from its sole stockholder, Outsourced Automated Services ("Oasis").
The Company and Oasis formed eGlobe/Oasis Reservations LLC, a limited
liability company (the "LLC"), which is responsible for conducting ORS'
business operations. The Company manages and controls the LLC and received
90% of the profits and losses from ORS' business. The LLC was funded by
contributions effected by the members under a Contribution Agreement dated
as of September 15, 1999 (the "Contribution Agreement"). The Company issued
1.5 million shares of its Common Stock, valued at $3 million on the date of
issuance, as its contribution to the LLC. In addition, the Company
contributed certain contingent warrants to purchase additional shares of
the Company Common Stock to the LLC. Oasis contributed its shares in ORS
valued at $2.3 million to the LLC. See Form 8-K filed on October 5, 1999
for greater detail regarding this acquisition. The preliminary purchase
price allocation reflects the preliminary estimates of the fair value of
the assets acquired and liabilities assumed based on management's review
and preliminary third party appraisals. The final purchase price allocation
will be determined as additional information becomes available.
(b) On October 14, 1999, the Company acquired iGlobe, Inc. for an aggregate
purchase price of $9,943,000 consisting of (i) Series M Convertible
Preferred Stock valued at $9,643,000, (ii) direct acquisition costs of
approximately $300,000, and (iii) a note payable November 1, 1999 for
approximately $1.3 million to the seller for iGlobe's cash flow deficit
from August 1, 1999 to the closing date. The acquisition was accounted for
using the purchase method of accounting. The preliminary purchase price
allocation reflects the preliminary estimates of the fair value of the
assets acquired and liabilities assumed based on management's review and
preliminary third party appraisals. The inal purchase price allocation
will be determined as additional information becomes available.
(c) Issuance of Preferred Stock to Prepay $4 million of $20 million note to
EXTL Investors. The Company and EXTL Investors agreed on August 18, 1999
that the Company will issue to EXTL Investors 40 shares of 5% Series J
Cumulative Convertible Preferred Stock as prepayment of $4 million of the
outstanding $20 million secured note to EXTL Investors. The carrying value
of the $4 million portion of the note, net of unamortized discount of $2.1
million, was approximately $1.9 million. The excess of the fair value of
the Series J Preferred over the carrying value of the note of $2.1 million
will be recorded as a loss on debt extinguishment in October 1999. The $4.0
million prepayment was allocated to reflect a reduction of $649,000 in the
current portion of the note with the remainder to reduce long-term
maturities. See the Company's 8-K filed on September 3, 1999 for greater
detail regarding this transaction.
(d) On September 3, 1999, the Company issued 30 shares of 5% Series K
Cumulative Convertible Preferred Stock ("Series K Preferred") in exchange
for the share of Series G Cumulative Convertible Redeemable Preferred Stock
("Series G Preferred"). See the Company's 8-K filed on September 3, 1999
for greater detail regarding this transaction.
(e) On October 15, 1999, investors purchased 2,000 shares of Series N
Cumulative Convertible Preferred Stock for an aggregate purchase price of
$2,000,000.
The following pro forma adjustments to the unaudited pro forma condensed
consolidated balance sheet are as if the above transactions occurred as of
August 31, 1999:
(1) To reflect the consolidation of the LLC and the related underlying assets
and liabilities of ORS.
ALLOCATION OF ASSETS AND LIABILITIES OF THE LLC:
Cash 3,000
Accounts receivable 483,000
Other current assets 192,000
Property and equipment 671,000
Intangibles 1,580,000
Accounts payable (115,000)
Current liabilities (546,000)
Minority Interest (2,268,000)
-----------
TOTAL $ ___
===========
eGLOBE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(2) To reflect the acquisition of iGlobe. The components of the purchase price
and its preliminary allocation to the assets and liabilities acquired are
as follows:
COMPONENTS OF PURCHASE PRICE:
Company's Series M Convertible Preferred Stock $ 9,643,000
Direct acquisition costs 300,000
Note payable to seller of iGlobe 1,300,000
--------------
TOTAL PURCHASE PRICE $ 11,243,000
ALLOCATION OF PURCHASE PRICE:
Property and equipment 5,577,000
Other current assets 900,000
Other assets 1,950,000
Intangibles 2,820,000
Goodwill 1,496,000
Current Maturities of Notes Payable (600,000)
Notes Payable - Long Term (900,000)
--------------
___
(3) Adjustments to cash: ==============
Proceeds from the sale of preferred stock $ 2,000,000
==============
(4) Adjustments to debt: Notes payable/
current maturities Long-term
of long-term debt debt, net
Prepayment of secured notes with Series J Preferred
Stock, net of unamortized discount of $2,120,000 (See Note 6) $ (649,000) $(1,231,000)
============ ============
(5) Adjustment to Redeemable Preferred Stock (See Note 6)
Exchange of Series G Redeemable Preferred Stock for Series
K Convertible Preferred Stock $(3,036,000)
============
(6) Other adjustments to Stockholders' Equity: Additional Accumulated
Paid-in Capital Deficit
----------------- -------------
Issuance of Series J Preferred Stock $ 4,000,000 $(2,120,000)
Issuance of Series K Preferred Stock (See Note 5) 3,036,000 -
Issuance of Series M Preferred Stock 9,643,000 -
Issuance of Series N Preferred Stock 2,000,000 -
----------------- ------------
$ 18,679,000 $(2,120,000)
================= ============
(c) Exhibits.
None. The Company's 8-K filed on September 3, 1999 is incorporated by
reference.
SIGNATURE
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.
eGobe, Inc.
Date: October 15, 1999 By: /s/ Graeme S.R. Brown
------------------------------
Graeme S.R. Brown
Associate General Counsel and
Assistant Secretary
EXHIBIT INDEX
Exhibit Description
- -------- ------------
None. The Company's 8-K filed on September 3, 1999 is incorporated
by reference.