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) August 25, 1999
JENKON INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 000-24637 91-1890338
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(STATE OR OTHER (COMMISSION FILE (IRS EMPLOYER
JURISDICTION OF NUMBER) IDENTIFICATION NO.)
INCORPORATION)
7600 N.E. 41st Street, Suite 350
Vancouver, Washington 98662
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (360) 256-4400
ITEM 5. OTHER EVENTS
TRANSACTION WITH MULTIMEDIA KID.
On August 25, 1999 Jenkon International, Inc. (the "Company") entered
into a non-binding letter of intent (the "Letter of Intent") to acquire
Multimedia KID - Intelligence in Education Ltd., ("MMKid") an Israeli-based
interactive educational company.
If the transaction contemplated by the Letter of Intent (the
"Transaction") is consummated, the Company will issue to MMKid stockholders
an aggregate of (i) 840,000 shares of Common Stock, (ii) 1,208,000 shares of
a newly-created Series B Redeemable Preferred Stock and (iii) 1,208,000
shares of Series C Redeemable Preferred Stock. The Series B and Series C
Preferred Stock will be convertible into an aggregate of 24,160,000 shares of
Company Common Stock and will have no voting or conversion rights unless and
until the stockholders of the Company have approved the grant of voting
rights to such shares. Upon such stockholder approval, the Series B and
Series C Preferred Stock will have voting rights on an as-converted basis and
will be convertible into Common Stock once certain agreed-to revenue targets
for MMKid have been achieved. Assuming all shares of Series B and Series C
Preferred Stock are converted into Common Stock, former stockholders of MMKid
would hold approximately 83% of Jenkon's fully-diluted Common Stock.
The proposed Transaction is subject to certain contingencies, including
the execution by the parties of a definitive agreement and completion of a $4
million private placement by the Company to fund the operations of the
combined companies. The transaction is expected to close by mid-September
1999. In the event that Jenkon stockholder approval of the grant of voting
rights to the Series B and Series C Preferred Stock is not obtained on or
prior to February 28, 2000, the shares of Series B and Series C Preferred
Stock will be redeemable at the option of the holders thereof at a price of
$10 per share for a total redemption price of $24,160,000.
Upon consummation of the Transaction, the Company will promptly file a
registration statement with respect to not less than 6,600,000 shares of
Common Stock underlying the Preferred Stock issued to the former MMKid
stockholders. In addition, the Company will grant the former MMKid
stockholders piggyback and demand registration rights with respect to Common
Stock underlying the Preferred Stock that is not registered as described
above. The demand registration rights shall be exercisable at any time
within 180 days following the date of Closing. Piggyback rights will be
exercisable commencing one year after the Closing. Notwithstanding the
registration of shares, MMKid stockholders will agree to 12 month lock-up
restrictions which shall apply to all shares other than the 6,600,000 shares
described above and shall terminate (i) at any time after the closing sales
price of Company Common Stock exceeds $6 per share for 20 consecutive trading
days, or (ii) at any time after the Company completes a public offering of
Common Stock for cash (other than upon exercise of outstanding options or
warrants).
UPDATE AS TO FINANCIAL CONDITION; LACK OF CAPITAL RESOURCES
As indicated in the Company's quarterly report on Form 10-QSB for the
quarter ended March 31, 1999, as a result of increased competitive pressures,
the Company has accelerated the development of its next generation management
information system. Because of this increased competitive pressure as well
as the development costs associated with the completion of the Company's next
generation product, the Company has experienced significant losses in the
fourth quarter of fiscal 1999 which have continued in the first quarter of
fiscal 2000.
If the Transaction is completed as contemplated by the Letter of Intent,
the Company will receive an additional $4,000,000 in private placement equity
financing, $2,000,000 of which will be allocated to the Company's existing
business and completion of the development of the next generation product.
There can be no assurance that a financing transaction can be completed on a
timely basis or on terms that are favorable to the Company. Absent such
additional financing, it is unlikely that the Company will have sufficient
capital to continue the development of the next generation product or to
continue its existing operations beyond September 30, 1999.
BOARD AND MANAGEMENT CHANGE
Philip Luizzo and Joe Albanese have been appointed to the Board of
Directors effective August 23, 1999 and Bill Daniher has resigned from the
Board of the Company effective August 11, 1999. Mr. Luizzo and Mr. Albanese
will serve on the Board's Audit Committee.
In addition, Robert Cavitt, currently Executive Vice President at the
Company, will be appointed President of Jenkon effective September 1, 1999.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
Attached as Exhibit 99.1 is the Letter of Intent. Attached as Exhibit 99.2
is the press release issued by the Company on August 26, 1999, relating to
the MMKid transaction.
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.
JENKON INTERNATIONAL, INC.
(Registrant)
By: /s/ DAVID EDWARDS
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David Edwards
Chief Executive Officer and
Director
By: /s/ ROBERT CAVITT
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Robert Cavitt
Executive Vice President and
Director
EXHIBIT INDEX
Exhibit
Number Description
99.1 Letter of Intent, dated August 25, 1999, among the Company, MMKid
and the stockholders of MMKid.
99.2 Press Release by the Company, dated August 26, 1999