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): June 28, 2002
Verticalnet, Inc.
________________________________________________________________________________
(Exact name of Registrant as Specified in Charter)
Pennsylvania 000-25269 23-2815834
________________________________________________________________________________
(State or Other (Commission (IRS Employer
Jurisdiction File Number) Identification No.)
of Incorporation)
300 Chester Field Parkway, Malvern, PA 19355
________________________________________________________________________________
(Address of principal executive offices) Zip Code
Registrant's telephone, including area code: 610-240-0600
(Former name and former address, if changed since last report)
________________________________________________________________________________
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 1, 2002, the Registrant announced that, on June 28, 2002, it
had completed the sale of its Small and Medium Business division ("SMB"), which
operates 59 online public marketplaces, to Vert Markets Inc. (the "Purchaser"),
a wholly-owned subsidiary of Corry Publishing Inc., which is the operator of
ISIT.com.
Under the Asset Purchase Agreement, dated as of June 28, 2002, by and
among the Registrant, Verticalnet LLC, Vert Tech LLC, Corry Publishing, Inc. and
the Purchaser (the "Asset Purchase Agreement"), the Registrant sold certain of
the assets of the SMB division to the Purchaser in consideration for the payment
of $2.35 million in cash to the Registrant at the closing date and the
assumption by the Purchaser of identified liabilities of the SMB division. In
addition, under the Asset Purchase Agreement, the Registrant is entitled to
receive up to $6.5 million as an earn-out over the four-year period after the
closing date.
Copies of the Asset Purchase Agreement and the press release issued by
the Registrant on July 1, 2002, concerning the sale of the SMB division are
attached hereto as Exhibits 2.1 and 99.1, respectively, and are incorporated
herein by reference.
ITEM 5. OTHER EVENTS
On July 1, 2002, the Registrant announced that, on June 28, 2002, the
Registrant completed the repurchase of 100% of Registrant's outstanding shares
of Series A 6.00% Convertible Redeemable Preferred Stock due 2010, plus accrued
dividends thereon, for a purchase price of $5.0 million, and agreed to the
cancellation of a Common Stock Purchase Warrant, dated April 7, 2000.
On July 1, 2002, the Registrant announced that its Board of Directors had
approved a 1-for-10 reverse stock split effective with the commencement of
trading Monday, July 15, 2002. Previously, on June 5, 2002, the Registrant's
shareholders authorized the Board of Directors to effect a reverse stock split
in the range of 1:5 to 1:10, with the specific exchange rate to be determined at
the discretion of the Board of Directors. A copy of the Amendment to the
Registrant's Amended and Restated Articles of Incorporation that effects the
1-for-10 reverse stock split is attached hereto as Exhibit 1.1 and incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) None
(b) Pro Forma Financial Information
Basis of Presentation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
Unaudited Pro Forma Condensed Consolidated Statements of
Operations
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
(c) Exhibits.
1.1 Amendment to the Registrant's Amended and
Restated Articles of Incorporation
2.1 Asset Purchase Agreement, dated as of June 28,
2002, between Verticalnet, Inc., Verticalnet
LLC, Vert Tech LLC, Corry Publishing, Inc. and
Vert Markets Inc.
99.1 Press Release dated July 1, 2002
2
VERTICALNET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated balance
sheet of Verticalnet, Inc. (or the "Company") as of March 31, 2002 and the
related unaudited pro forma condensed consolidated statements of operations for
the three months ended March 31, 2002 and the year ended December 31, 2001, give
effect to the sale of the SMB unit as if the transaction had occurred as of
March 31, 2002 in the case of the unaudited pro forma condensed consolidated
balance sheet, and as of January 1, 2001 in the case of the unaudited pro forma
condensed consolidated statements of operations.
The unaudited pro forma condensed consolidated balance sheet also gives
effect to the June 28, 2002 repurchase of 100% of the Company's outstanding
shares of Series A Convertible Redeemable Preferred Stock due 2010, plus accrued
dividends thereon, for a purchase price of $5.0 million and to the 1-for-10
reverse stock split effective July 15, 2002.
The unaudited pro forma condensed consolidated financial statements
have been prepared by the management of the Company and should be read in
conjunction with the Company's historical consolidated financial statements,
which have been previously filed in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2002.
The unaudited pro forma condensed consolidated financial statements are
provided for illustrative purposes only and do not purport to represent what the
actual consolidated results of operations or the consolidated financial position
of the Company would have been if the transactions had occurred on the dates
assumed, nor is it indicative of the Company's future consolidated results of
operations or consolidated financial position.
VERTICALNET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except for per share data)
March 31, 2002
VERTICALNET, PRO FORMA PRO FORMA REPURCHASE OF ADJUSTED
INC. ADJUSTMENTS(1) TOTAL PREFERRED STOCK(2) TOTAL
--------- ----------- --------- --------------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 33,983 $ 3,450 (b) $ 37,433 $ (5,000) $ 32,433
Short-term investments 33 33 33
Accounts receivable, net of allowance for
doubtful accounts 2,306 1,221 (c) 3,527 3,527
Prepaid expenses and other assets 3,816 (107)(d) 3,709 3,709
Assets held for disposal 9,126 (9,126)(b) - -
--------- -------- --------- ------ --------
Total current assets 49,264 (4,562) 44,702 (5,000) 39,702
Property and equipment, net 5,983 5,983 5,983
Goodwill and other intangibles, net of
accumulated amortization 30,094 30,094 30,094
Long-term investments 1,912 1,912 1,912
Other assets 20,460 20,460 20,460
--------- -------- --------- ------ --------
Total assets $ 107,713 $ (4,562) $ 103,151 (5,000) $ 98,151
========= ======== ========= ====== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 3,029 $ 224 (c) $ 3,253 $ $ 3,253
Accrued expenses 15,814 1,437 (c) 17,664 17,664
413 (d)
Deferred revenues 25,824 25,824 25,824
Other current liabilities 12,937 12,937 12,937
Liabilities held for disposal 10,392 (10,392)(b) - -
--------- -------- --------- ------ --------
Total current liabilities 67,996 (8,318) 59,678 - 59,678
--------- -------- --------- ------ --------
Long-term debt 416 416 416
Other long-term liabilities 1,912 1,912 1,912
Convertible notes 21,705 21,705 21,705
--------- -------- --------- ------ --------
Total liabilities 92,029 (8,318) 83,711 - 83,711
--------- -------- --------- ------ --------
Commitments and contingencies
Series A 6.00% convertible redeemable
preferred stock, $.01 par value 104,098 104,098 (104,098) -
Put arrangement involving common stock 1,057 1,057 1,057
Shareholders' equity (deficit) (89,471) 3,756 (e) (85,715) 99,098 13,383
--------- -------- --------- ------ --------
Total liabilities and shareholders'
equity (deficit) $ 107,713 $ (4,562) $ 103,151 $ (5,000) $ 98,151
========= ======== ========= ====== ========
The accompanying notes are an integral part of these statements.
VERTICALNET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except for per share data)
Three months ended March 31, 2002
VERTICALNET, Pro Forma Pro Forma
INC. Adjustments(1) Total
------------ -------------- ---------
REVENUES:
Software license $ 6,258 $ 6,258
Services and maintenance 1,747 1,747
--------- --------- ---------
Total Revenue 8,005 - 8,005
COST OF REVENUE:
Cost of license 266 266
Cost of acquired technology 160 160
--------- --------- ---------
Cost of software 426 - 426
Cost of maintenance and services 1,463 1,463
--------- --------- ---------
Total cost of revenue 1,889 - 1,889
Research and development 3,516 3,516
Sales and marketing 1,749 1,749
General and administrative 3,551 3,551
Restructuring and asset impairment charges 1,355 1,355
Amortization and other intangible expenses 1,056 1,056
--------- --------- ---------
13,116 - 13,116
--------- --------- ---------
Operating loss (5,111) - (5,111)
--------- --------- ---------
Net interest expense and other (652) (652)
--------- --------- ---------
Net loss from continuing operations (5,763) - (5,763)
Preferred stock dividends and accretion (1,917) (1,917)
--------- --------- ---------
Net loss from continuing operations
attributable to common shareholders $ (7,680) - $ (7,680)
========= ========= =========
Basic and diluted loss per common share
from continuing operations(3) $ (0.69) $ (0.69)
========= =========
Weighted average common shares outstanding
used in basic and diluted per share
calculation(3) 11,138 11,138
========= =========
The accompanying notes are an integral part of these statements.
VERTICALNET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except for per share data)
Year ended December 31, 2001
VERTICALNET, PRO FORMA PRO FORMA
INC. ADJUSTMENTS(a) TOTAL
------------ -------------- ---------
REVENUES:
E-enablement, e-commerce, advertising and other services $ 89,962 $ (89,962) $ --
Software licensing and related services 35,608 35,608
--------- --------- ---------
Total Revenues 125,570 (89,962) 35,608
COSTS AND EXPENSES:
Cost of e-enablement, e-commerce, advertising and other services 21,157 (21,157) --
Cost of software licensing and related services 17,354 17,354
Research and development 27,037 (7,313) 19,724
Sales and marketing 63,421 (48,059) 15,362
General and administrative 49,550 (12,023) 37,527
Amortization 121,726 (10,002) 111,724
Restructuring and asset impairment charges 345,542 (76,917) 268,625
In-process research and development charges 420 420
--------- --------- ---------
Operating loss (520,637) 85,509 (435,128)
--------- --------- ---------
Net interest expense and other (236,312) -- (236,312)
--------- --------- ---------
Net loss from continuing operations (756,949) 85,509 (671,440)
Preferred stock dividends and accretion (7,420) -- (7,420)
--------- --------- ---------
Net loss from continuing operations attributable to common shareholders $(764,369) $ 85,509 $(678,860)
========= ========= =========
Basic and diluted loss per common share from continuing operations(3) $ (78.87) $ (70.04)
========= =========
Weighted average common shares outstanding
used in basic and diluted per share calculation(3) 9,692 9,692
========= =========
The accompanying notes are an integral part of these statements.
VERTICALNET, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. On June 28, 2002, Verticalnet completed the sale of the SMB unit to
Corry Publishing. Verticalnet received cash consideration of $2.35
million. In addition, Verticalnet may receive up to an additional $6.5
million based on a four-year performance-based earn-out provision. The
potential earn-out has not been reflected in the pro forma condensed
consolidated financial statements. Verticalnet accounted for the SMB
unit as a discontinued operations beginning in 2002.
The assets held for sale as of March 31, 2002 included certain assets
that were sold during the ordinary course of the SMB unit's operations.
These other assets were also sold in June 2002 under a separate
agreement. These other assets were sold for $1.1 million, and the
proceeds, elimination of the assets, and effect on shareholders' equity
are included in the unaudited pro forma condensed consolidated balance
sheet as of March 31, 2002.
The unaudited pro forma condensed consolidated statements of operations
for the year ended December 31, 2001 and the three months ended March
31, 2002 give effect to the sale of the SMB unit and the sale of the
other assets as if the transactions had occurred as of January 1, 2001.
The unaudited pro forma condensed consolidated balance sheet gives
effect to the transactions as if they had occurred on March 31, 2002.
The unaudited pro forma condensed consolidated statements of operations
and pro forma condensed consolidated balance sheet reflect the
following adjustments:
(a) To record the elimination of the SMB unit's operating
results for the year ended December 31, 2001. No
adjustments are needed for the three months ended
March 31, 2002 as the SMB unit was reflected as a
discontinued operation during that period.
(b) To record the sale of the SMB unit and the sale of
the other assets.
(c) To reflect the retention of certain assets and
liabilities that previously were held for disposal.
(d) To record the estimated costs of the transaction.
(e) To reflect the estimated effect on shareholders'
equity as of March 31, 2002, calculated as follows:
Pro forma gain on sale to Corry Publishing:
Proceeds $ 2,350
Liabilities assumed, net of assets 3,912
Estimated transaction costs (520)
-------
Gain on sale $ 5,742
=======
Sale or write-off of other assets included in the SMB unit:
Proceeds $ 1,100
Assets disposed of or written-off (3,086)
-------
SMB unit operating loss pertaining
to sale or write-off of other assets $(1,986)
=======
Total effect on shareholders' equity $ 3,756
=======
During the second quarter of 2002, the results of operations of the SMB
unit will impact the net carrying value of the business as of the date
of the sale. This will result in a change in the gain (loss) on the
sale to Corry Publishing, and will be reflected in the reported results
for the second quarter of 2002.
2. The unaudited pro forma condensed consolidated balance sheet also gives
effect to the June 28, 2002 repurchase of the Company's Series A
Preferred Stock for $5.0 million. The actual amount of preferred stock
redeemed will be higher than shown due to preferred stock dividends and
accretion of approximately $1.9 million in the second quarter of 2002.
3. The weighted average common shares outstanding used in the basic and
diluted per share calculation gives effect to the 1-for-10 reverse
stock split effective July 15, 2002.
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 thereunto duly authorized.
VERTICALNET, INC.
Date: July 15, 2002 By: /s/ James W. McKenzie Jr.
--------------------------
Name: James W. McKenzie Jr.
Title: Executive Vice
President, General Counsel
and Secretary
3
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
1.1 Amendment to the Registrant's Amended and Restated Articles of
Incorporation
2.1 Asset Purchase Agreement, dated as of June 28, 2002, between
Verticalnet, Inc., Verticalnet LLC, Vert Tech LLC, Corry Publishing,
Inc. and Vert Markets Inc.
99.1 Press Release dated July 1, 2002
4