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UNITED STATES
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: December 29, 1999
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(Date of earliest event reported)
GLOBAL SPORTS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-16611 04-2958132
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification Number)
1075 First Avenue, King of Prussia, PA 19406
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(Address of principal executive offices) (Zip Code)
(610) 265-3229
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
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Item 2. Acquisition Or Disposition Of Assets
During the fourth quarter of 1998, Global Sports, Inc. (the "Company")
began to investigate whether it would be beneficial for the Company to expand
its business to include the sale of athletic footwear and sporting goods through
the internet. By the end of 1998, the Company had developed a business model in
which the Company would enter into exclusive contracts with large sporting goods
retailers to operate their e-Commerce businesses and pay the retailers a share
of sales made through the websites.
While marketing its business model, the Company realized that the
amount of management time necessary to launch and operate its e-Commerce
business would be substantial. The Company also realized that its capital
resources would not be sufficient to fund its rapidly growing e-Commerce
business while maintaining and growing its existing businesses and that its
existing businesses might create a conflict of interest with its e-Commerce
business. As a result, the Company concluded that it should focus exclusively on
its e-Commerce business and on April 20, 1999, the Company formalized a plan to
divest its non-internet businesses.
On December 29, 1999, the Company and it's subsidiaries RYKA Inc., KPR
Sports International, Inc., G.S.I., Inc. and Apex Sports International, Inc.
(the Company and it's subsidiaries are collectively referred to herein as the
"Company") entered into an Asset Purchase Agreement with American Sporting Goods
Corporation ("ASGC") whereby ASGC purchased from the Company certain assets
relating to the manufacturing, marketing, distribution and selling at wholesale
of footwear bearing the RYKA, Yukon and Apex brands (the "Branded Division") and
ASGC assumed from the Company certain liabilities and agreements of the Company
relating to the Branded Division.
The assets acquired by ASGC include: (i) substantially all inventory of
the Branded Division (other than inventory held for retail sale in connection
with the Company's e-Commerce business); (ii) the Branded Division's point of
purchase assets and equipment, including a trade show booth and certain other
personal property; (iii) certain prepaid items and deposits; (iv) the
copyrights, patent rights and trademarks used in the Branded Division; and (v)
certain specified agreements of the Branded Division. ASGC did not acquire any
real property of the Company or any of the Company's accounts receivable.
The purchase price for the assets acquired by ASGC consisted of a
closing payment of $10,317,322, subject to a final determination of the value of
the inventory acquired. The purchase price was determined through negotiations
between the Company and ASGC conducted on an arms' length basis.
Item 7. Financial Statements, Pro Forma Financial Information And Exhibits
Listed below are certain pro forma financial information and exhibits
filed as a part of this Report on Form 8-K:
(b) Pro Forma Financial Information:
- Unaudited Pro Forma Consolidated Balance Sheet as of
September 30, 1999
(c) Exhibits:
2.1 Asset Purchase Agreement, dated December 29, 1999, among
American Sporting Goods Corporation and RYKA Inc., KPR
Sports International, Inc., G.S.I., Inc., Apex Sports
International, Inc. and Global Sports, Inc.
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GLOBAL SPORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
BACKGROUND
On December 29, 1999, Global Sports, Inc. and its subsidiaries RYKA, Inc.,
KPR Sports International, Inc., G.S.I., Inc., and APEX Sports International,
Inc. (collectively referred to herein as the "Company") entered into an Asset
Purchase Agreement with American Sporting Goods Corporation ("ASGC") whereby
ASGC purchased from the Company certain assets relating to the manufacturing,
marketing, distribution and selling at wholesale of footwear bearing the RYKA,
Yukon and Apex brands (the "Branded Division") and ASGC assumed from the Company
certain liabilities and agreements of the Company relating to the Branded
Division.
The assets acquired include (i) all the inventory of the Branded Division;
(ii) the Branded Division's point of purchase displays not on site at customers'
premises, and equipment including a trade show booth and certain other personal
property; (iii) certain prepaid items and deposits; (iv) the copyrights, patent
rights and trademarks used in the Branded Division; and (v) certain specified
agreements of the Branded Division. ASGC did not acquire any real property of
the Company or any of the Company's accounts receivable.
The purchase price consisted of a closing payment of $10,317,322, subject
to a final determination of the value of the inventory of the inventory
acquired. For purposes of this pro forma presentation, the purchase price was
adjusted to reflect the value of the inventory sold less the negotiated reserves
for the periods presented.
PERIODS PRESENTED
A pro forma consolidated balance sheet has been presented as of September
30, 1999. Because the Branded Division of the Company has been classified as
discontinued operations in the Company's recent SEC filings, a presentation of
pro forma statements of operations has not been presented. Had pro forma
statements of operations been presented, the only adjustment to income from
continuing operations would have been a reduction in interest expense of
approximately $875,000 for the year ended December 31, 1998 and approximately
$650,000 for the nine-month period ending September 30, 1999 assuming receipt of
sale proceeds as of January 1, 1998 and 1999, respectively, and the Company's
average borrowing rate.
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GLOBAL SPORTS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1999
Pro Forma
Historical Adjustments Pro Forma
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ASSETS
Current assets
Cash and cash equivalents $39,467,680 $9,887,654 (f) $49,355,334
Inventory 4,669,217 4,669,217
Prepaid expenses and other current assets 621,442 621,442
Refundable income taxes 2,220,878 2,220,878
Net assets of discontinued operations 43,012,442 (9,132,125) (a)
(60,313) (b)
(73,256) (c)
(5,190,453) (d)
273,040 (e) 28,829,335
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Total current assets 89,991,659 (4,295,453) 85,696,206
Property & equipment, net of accumulated
depreciation and amortization 16,219,279 16,219,279
Other assets 219,511 219,511
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Total assets $106,430,449 ($4,295,453) $102,134,996
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion - notes payable, bank $ 3,699,207 $ 3,699,207
Current portion - capital lease obligation, related party 136,524 136,524
Accounts payable and accrued expenses 15,487,521 15,487,521
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Total current liabilities 19,323,252 19,323,252
Capital lease obligation, related party 2,077,906 2,077,906
Mandatorily redeemable preferred stock 100 100
Commitments and contingencies
Stockholders' equity:
Preferred stock - -
Common stock 194,766 194,766
Additional paid in capital 98,693,234 98,693,234
Accumulated deficit (13,644,992) ($4,295,453) (g) (17,940,445)
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85,243,008 (4,295,453) 80,947,555
Less: Treasury stock, at cost 213,817 213,817
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Total stockholders' equity 85,029,191 ($4,295,453) 80,733,738
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Total liabilities and stockholders' equity $106,430,449 ($4,295,453) $102,134,996
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See notes to unaudited pro forma consolidated financial statements.
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GLOBAL SPORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Pro forma balance sheet adjustments at September 30, 1999:
(a) To record book value of all RYKA, Yukon and Apex inventory sold. Assumes
that buyer purchases net book value of inventory less a negotiated reserve
of $830,000.
(b) To record sale of certain fixed assets at net book value.
(c) To record sale of point of purchase assets and equipment, prepaid items and
certain other deposits at net book value.
(d) To eliminate goodwill and intangible assets related to RYKA, Yukon and
Apex.
(e) To eliminate certain accounts payable and accrued expenses assumed by
buyer.
(f) To record proceeds of sale of Branded Division.
(g) To record loss on sale of Branded Division.
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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.
GLOBAL SPORTS, INC.
DATE: January 13, 2000 By: /s/ Michael G. Rubin
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Michael G. Rubin
Chairman of the Board &
Chief Executive Officer
DATE: January 13, 2000 By: /s/ Steven A. Wolf
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Steven A. Wolf
Vice President &
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
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2.1 Asset Purchase Agreement, dated December 29, 1999, among American
Sporting Goods Corporation and RYKA Inc., KPR Sports
International, Inc., G.S.I., Inc., Apex Sports International,
Inc. and Global Sports, Inc.
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