8-K 1 svi_8k-051602.txt -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- UNITED STATES 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 event reported): May 16, 2002 (May 1, 2002) SVI SOLUTIONS, INC. (Exact name of registrant as specified in its charter) Delaware 0-23049 33-0896617 -------- ------- ---------- (State or other jurisdiction of (Commission (I.R.S. Empl. Ident. No.) incorporation or organization) File Number) 5607 Palmer Way, Carlsbad, California 92008 ------------------------------------- ----- (Address of principal executive offices) (Zip Code) (877) 784-7978 -------------- (Registrant's telephone number, including area code) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS ------- ------------------------------------ On May 1, 2002, SVI Solutions, Inc. ("SVI"), and Softline Limited ("Softline"), which beneficially owned 48.8% of the outstanding common shares of SVI at December 31, 2001, completed an integrated series of transactions (the "Transactions") as follows: 1. SVI transferred to Softline all of SVI's right, title and interest to the "IBIS Note and Pledge Agreement" further described below. 2. SVI issued to Softline 53,000 shares of newly-designated Series A Preferred stock at a deemed purchase price of $100 per share. 3. In consideration of the above, Softline released SVI from approximately $12.3 million in indebtedness represented by an Amended and Restated Subordinated Promissory Note dated June 30, 2001. 4. Softline exchanged 10,700,000 SVI common shares held by Softline for 88,000 additional shares of Series A Preferred. The Transactions will have an effective date for accounting purposes of January 1, 2002. SVI will not recognize any gain or loss in connection with the disposition of the IBIS Note and Pledge Agreement or the other components of the Transactions. The IBIS Note and Pledge Agreement referenced above consists of a promissory note issued by Kielduff Investments Limited ("Kielduff") in the original principal amount of $18.1 million with an outstanding balance of $19.1 million as of January 1, 2002. Such note is secured by a pledge of 1,536,000 shares of common stock of Integrity Software, Inc., which had been pledged to SVI pursuant to a Pledge Agreement dated December 31, 1998. Kielduff is not believed to have significant assets other than the shares subject to the Pledge Agreement. SVI has previously recognized impairment allowances with respect to the IBIS Note and Pledge Agreement, and recorded their fair value as of December 31, 2001 at $7 million. The terms of the Series A Preferred stock are summarized below, but such summary is qualified entirely by the Certificate of Designations and the Investor Rights Agreement attached as exhibits to this report. Original Issue Price: $100 per share (aggregate of $14.1 million) Dividends: Cumulative dividends of 7.2% of Original Issue Price per year (beginning January 1, 2002) payable semi-annually beginning June 30, 2002 when, as and if declared by the Board of Directors out of funds legally available therefor. Date of Maturity: December 31, 2006 Optional Conversion: Holders may convert each share of Series A Preferred at any time into the number of SVI common shares determined by dividing the Original Issue Price plus all accrued and unpaid dividends, by a conversion price initially equal to $0.80. The conversion price will increase at an annual rate of 3.5% calculated on a semi-annual basis. 2 Mandatory Conversion: If any shares of Series A Preferred have not been redeemed by SVI or converted into common shares by the holder prior to the Maturity Date, such shares will be converted automatically to SVI common shares at the then applicable conversion ratio. Optional Redemption: SVI may redeem the Series A Preferred at any time in whole or in part (subject to a $1 million minimum redemption) prior to the Maturity Date for 107% of the sum of the Original Issue Price and accrued and unpaid dividends. SVI must provide advance written notice to the holders of its intention to redeem, and the holders may then elect to convert all or part of the redeemed shares into common shares using the then applicable conversion formula. Liquidation Preference: The Series A Preferred holders will be entitled to receive upon any liquidation, in preference to the holders of the common shares and any other junior series of capital stock, the Original Issue Price plus accrued and unpaid dividends. The remaining assets available on liquidation will be distributed to the common and junior capital stockholders. Voting Rights: The Series A Preferred will have no voting rights prior to conversion into common shares, except with respect to proposed impairments of the Series A Preferred rights and preferences, or as provided by law. Registration Rights: Softline (but not its transferees) may require SVI to register on Form S-3 the resale of common shares obtainable upon conversion of the Series A Preferred ("Registrable Securities"), provided SVI is then eligible to use Form S-3, Softline proposes to sell Registrable Securities to the public at an aggregate price of at least $5,000,000, and SVI has not within the prior twelve months already effected two registrations on Form S-3 for Softline. Softline may also request to have Registrable Securities included in any registration statement SVI otherwise proposes to file, subject to (a) customary exceptions for employee benefit plans and Rule 145 transactions and (b) reductions at the request of an underwriter. Right of First Refusal: SVI has the right to purchase all but not less than all of any Registrable Securities Softline proposes to sell to a third party, upon the same price and terms as the proposed sale to a third party. 3 Softline continues to own 8,328,715 shares of SVI common stock following the Transactions. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS ------- --------------------------------- (b) Pro forma financial information The following unaudited pro forma condensed consolidated financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements and notes thereto of SVI included in its Annual Report on Form 10-K/A filed July 30, 2001, and SVI's December 31, 2001 unaudited quarterly financial statements on Form 10-Q filed February 19, 2002, with the Securities and Exchange Commission. The unaudited pro forma condensed consolidated balance sheet shows the Company's condensed consolidated balance sheet as of December 31, 2001, giving effect to the Transactions as if they had occurred on December 31, 2001. The unaudited pro forma condensed consolidated statements of operations show SVI's historical results for the year ended March 31, 2001, and the nine months ended December 31, 2001, giving effect to the Transactions as if they had occurred at April 1, 2000 and 2001, respectively. The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Transactions had been consummated at the beginning of the earliest period presented, nor is it necessarily indicative of future operating results or financial position. 4 SVI Solutions, Inc. and Subsidiaries Pro Forma Consolidated Statement of Operations For the Twelve Months Ended March 31, 2001 (Unaudited)
SVI Solutions Pro Forma Pro Forma and Subsidiaries Adjustments Consolidated ------------- ------------- ------------- Net sales $ 32,672,262 $ - $ 32,672,262 Cost of goods sold 11,668,904 - 11,668,904 ------------- ------------- ------------- Gross profit 21,003,358 - 21,003,358 Expenses: Research and development 5,576,537 - 5,576,537 Depreciation and amortization 9,540,480 - 9,540,480 Selling, general and administrative 21,567,885 - 21,567,885 Impairment of capitalized software and goodwill associated with Australian operations 8,886,000 - 8,886,000 Impairment of note receivable in connection with the sale of IBIS Systems, Ltd. 7,647,236 - 7,647,236 ------------- ------------- ------------- Total expenses 53,218,138 - 53,218,138 Profit/(loss)from operations (32,214,780) - (32,214,780) Interest income 681,393 - 681,393 Interest expense (3,104,192) 1,037,080 A (2,067,112) Other income 89,189 - 89,189 Loss on sale of Australian subsidiary's net assets - - - Foreign exchange gain (loss) (8,623) - (8,623) ------------- ------------- ------------- Income before income tax (34,557,013) 1,037,080 (33,519,933) Income taxes (5,611,791) - (5,611,791) ------------- ------------- ------------- Net income (loss) $(28,945,222) $ 1,037,080 $(27,908,142) Preferred stock dividends - (1,015,200) B (1,015,200) ------------- ------------- ------------- Income (loss) available to common stockholders (28,945,222) 21,880 (28,923,342) ============= ============= ============= Loss per share - Basic and diluted $ (0.83) $ (1.02) ============= ============= Shares outstanding - Basic and diluted 34,761,386 (10,700,000) C 24,061,386 PRO FORMA ADJUSTMENTS: A Reverse interest expense on note payable to Softline. $ 1,037,080 B Assumed the Board declared dividends on preferred stock at 7.2% $ 1,015,200 C Softline exchanged 10,700,000 SVI common shares held by Softline for 88,000 shares of Series A Preferred (10,700,000)
5 SVI Solutions, Inc. and Subsidiaries Pro Forma Consolidated Statement of Operations For the Nine Months Ended December 31, 2001 (Unaudited)
SVI Solutions Pro Forma Pro Forma and Subsidiaries Adjustments Consolidated ------------- ------------- ------------- Net sales $ 22,586,726 $ - $ 22,586,726 Cost of goods sold 9,220,300 - 9,220,300 ------------- ------------- ------------- Gross profit 13,366,426 - 13,366,426 Expenses: Research and development 4,161,500 - 4,161,500 Depreciation and amortization 5,289,484 - 5,289,484 Selling, general and administrative 10,800,168 - 10,800,168 ------------- ------------- ------------- Total expenses 20,251,152 - 20,251,152 Profit/(loss)from operations (6,884,726) - (6,884,726) Interest income 15,600 - 15,600 Interest expense (2,829,161) 1,220,278 A (1,608,883) Other income (29,393) - (29,393) Overhead recoveries - - - Gain (loss) on disposal of Australian subs - - - Foreign exchange gain (loss) (13,901) - (13,901) ------------- ------------- ------------- Income before income tax (9,741,581) 1,220,278 (8,521,303) Income taxes 330,384 - 330,384 ------------- ------------- ------------- Net income (loss) $(10,071,965) $ 1,220,278 $ (8,851,687) Preferred stock dividends - (761,400) B (761,400) ------------- ------------- ------------- Income (loss) available to common stockholders $(10,071,965) $ 458,878 $ (9,613,087) ============= ============= ============= Loss per share - Basic and diluted $ (0.26) $ (0.35) ============= ============= Shares outstanding - Basic and diluted 38,091,899 (10,700,000) C 27,391,899
PRO FORMA ADJUSTMENTS A Reverse interest expense on note payable to Softline. $ 1,220,278 B Assumed the Board declared dividends on preferred stock at $ 761,400 7.20% C Softline exchanged 10,700,000 SVI common shares held by Softline for 88,000 shares of Series A Preferred (10,700,000) 6 SVI Solutions, Inc. and Subsidiaries Pro Forma Consolidated Balance Sheet As of December 31, 2001 (Unaudited)
SVI Solutions Softline Pro forma and Subsidiaries Transactions Consolidated ------------- ------------- ------------- ASSETS Current assets Cash $ 617,474 $ - $ 617,474 Accounts receivable, net 4,990,363 - 4,990,363 Income tax refund receivable - - - Other receivables 479,550 - 479,550 Inventories 224,768 - 224,768 Current portion of non-compete agreements 916,836 - 916,836 Deferred income taxes 135,308 - 135,308 Prepaid expenses and other current assets 595,310 - 595,310 ------------- ------------- ------------- Total current assets 7,959,609 - 7,959,609 Note receivables 7,000,000 (7,000,000) B - Intercompany receivable - - - Furniture and equipment, net 947,861 - 947,861 Capitalized software, net 18,963,797 - 18,963,797 Goodwill on acquisition of subsidiaries, net 15,980,773 - 15,980,773 Not-to-compete agreements, net 1,813,981 - 1,813,981 Deferred tax asset - - - Other assets 45,566 - 45,566 ------------- ------------- ------------- Total assets $ 52,711,587 $ (7,000,000) $ 45,711,587 ============= ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable 2,166,814 - 2,166,814 Accrued expenses 4,249,005 - 4,249,005 Dividend payable - 761,400 C 761,400 Line of credit 479,113 - 479,113 Deferred revenue 4,677,357 - 4,677,357 Due to stockholders 2,279,388 - 2,279,388 Current portion of long-term debts 7,420,631 - 7,420,631 Intercompany loans - - - Income taxes payable 57,196 - 57,196 ------------- ------------- ------------- Total current liabilities 21,329,504 761,400 22,090,904 Due to stockholders 12,257,358 (12,257,358)A,B - Deferred rent 122,194 - 122,194 ------------- ------------- ------------- Total liabilities 33,709,056 (11,495,958) 22,213,098 ------------- ------------- ------------- Stockholders' equity Preferred stock - 14,100,000 B 14,100,000 Common stock 3,949 - 3,949 Additional paid in capital 59,062,966 - 59,062,966 Treasury Stock (4,306,044) (10,062,920) B (14,368,964) Retained earnings (33,186,154) 458,878 A,C (32,727,276) Cumulative translation adjustment (2,572,186) - (2,572,186) ------------- ------------- ------------- 19,002,531 4,495,958 23,498,489 ------------- ------------- ------------- Total liabilities and stockholders' equity $ 52,711,587 $ (7,000,000) $ 45,711,587 ============= ============= =============
7 SVI Solutions, Inc. and Subsidiaries Pro Forma Consolidated Balance Sheet As of December 31, 2001 (Unaudited) PRO FORMA ADJUSTMENTS: DR CR ------------ ------------ A Reverse interest accrued from April 1, 2001 through December 31, 2001 Due to Stockholders 1,220,278 Interest expense 1,220,278 B Transactions with Softline. No gain or loss is recorded. IBIS note receivable 7,000,000 Note payable to Softline 11,037,080 Preferred stock 14,100,000 Treasury stock 10,062,920 C Assumed the Board declared 7.2% dividends on preferred stock for the period of April 1, 2001 through December 31, 2001 Preferred stock dividends 761,400 Dividend payable 761,400 8 (c) Exhibits Exhibit No. Description ----------- ----------- 2.1 Purchase and Exchange Agreement dated as of January 1, 2002 by and between SVI Solutions, Inc. and Softline Limited* 4.1 Certificate of Designations 4.2 Investor Rights Agreement * Exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K, but a copy will be furnished supplementally to the Securities and Exchange Commission upon request. 9 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. SVI SOLUTIONS, INC. Date: May 16, 2002 By: /s/ Barry M. Schechter ------------------------------- Barry M. Schechter Chief Executive Officer EXHIBIT INDEX Exhibit No. Description ----------- ----------- 2.1 Purchase and Exchange Agreement dated as of January 1, 2002 by and between SVI Solutions, Inc. and Softline Limited* 4.1 Certificate of Designations 4.2 Investor Rights Agreement * Exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K, but a copy will be furnished supplementally to the Securities and Exchange Commission upon request. 10