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 1934
Date
of Report: May 15, 2006
a21,
Inc.
(Exact
name of registrant as specified in its charter)
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Texas
(State
or Other Jurisdiction of
Incorporation)
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000-51285
(Commission
File Number)
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74-2896910
(I.R.S.
Employer Identification No.)
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7660
Centurion Parkway, Jacksonville, Florida
(Address
of Principal Executive Offices)
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32256
(Zip
Code)
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Registrant’s
telephone number, including areas code: (904)
565-0066
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(Former
Name or Former Address, is Changed Since Last
Report)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A2. below):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
oPre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01. Entry into Material Definitive Agreement.
See
the
description of the Merger Agreement, Notes, Warrant, Exchange Agreement and
Guaranty (each as defined in Item 2.01) in Item 2.01.
Item
2.01 Completion of Acquisition or Disposition of Assets.
On
May
16, 2006, AE Acquisition Corp. (“Merger Sub”), a Delaware corporation and wholly
owned subsidiary of a21, Inc. ("a21"), a Texas corporation, merged with and
into
ArtSelect, Inc., a Delaware corporation ("ASI") pursuant to a merger agreement
dated May 15, 2006 by
and
among a21, Merger Sub, ASI, the common and preferred stockholders of ASI listed
on Schedule I thereto and Udi Toledano as the stockholder
representative
(the
“Merger Agreement”). Pursuant to the terms of the Merger Agreement, ASI became a
wholly owned subsidiary of a21. ASI supplies home and office framed and unframed
wall décor to retailers, catalogers, membership organizations and consumers
through both online and traditional retail and wholesale distribution channels
(the “Business”). ASI's primary assets include receivables due from customers,
product inventory, and equipment. a21 intends to continue to use ASI's assets
to
continue the Business. In connection with the transactions contemplated by
the
Merger Agreement, ASI is being joined as a party to the Securities Purchase
Agreement by and among a21, SuperStock, and the purchasers listed therein,
dated
April 27, 2006. The Purchase Agreement was previously filed by a21 as an Exhibit
to its Current Report on Form 8-K dated April 27, 2006.
In
consideration for merger, the shareholders of ASI received an aggregate of
$4,500,000 of cash, $2,350,000 in secured notes (the “Notes”) and $3,150,000 of
Series A Preferred Stock (the “Preferred Stock”). Final adjustments will be made
to the purchase price after finalization of ASI's closing balance sheet.
The
Notes
bear interest at 6% per year and mature on the earlier to occur of a change
of
control (as set forth in the notes) and May 15, 2009. The first year of interest
on the principal balance of the Notes will be accrued and added to the principal
thereof. After the first year, interest will be payable quarterly, in arrears.
The Notes are secured by substantially all the assets of ASI (provided that,
with respect to up to $3,000,000 of the assets of ASI, the Notes are junior
to certain previously issed secured convertible notes) and the obligations
of
ASI pursuant to the Notes are guaranteed by a21 pursuant to a guaranty dated
May
15, 2006 (the “Guaranty”). The Notes include customary events of default,
including, but not limited to, the failure of ASI to pay any principal or
interest when due, the breach of any representation or warranty in the Merger
Agreement pursuant to which a21 acquired ASI (and which breach results in a
material adverse effect on the likelihood that the Notes will be repaid), or
the
insolvency or bankruptcy of a21 or ASI. Upon the occurrence of an event of
default, a Note will become due and payable, either automatically or upon notice
from the representative of all the holders of the Notes, depending on the
particular event of default.
The
Preferred Stock has certain liquidation preferences and, pursuant to an exchange
agreement entered into with each of the holders of Preferred Stock (the
“Exchange Agreement”), after a21 increases the number of its authorized shares
of common stock, is exchangeable for a21’s common stock at a minimum price per
share of $0.75, subject to adjustment pursuant to weighted average anti-dilution
provisions contained in the transaction documents. Pursuant to the Exchange
Agreement, (i) the minimum exchange price may not be reduced to below $0.60,
(ii) a21 may convert the Preferred Stock into common stock at 85% of the 20
day
average trading price of the common stock, and (iii) a21 may redeem the
Preferred Stock at its face value plus 5% per year.
On
May
16, 2006, the holders of Preferred Stock exchanged all of the Preferred Stock
for an aggregate of 4,200,000 shares of a21’s common stock at a per share price
of $0.75 (the “Exchange Stock”). Pursuant to the terms of the Exchange
Agreement, the Exchange Stock will not be issued by a21 until it increases
the
number of authorized shares of its common stock to accommodate such
exchange.
The
shareholders of ASI also received warrants to purchase 750,000 shares of a21’s
common stock at $1.00 per share (the “Warrants”), exercisable for common stock
only after a21 increases its authorized shares of common stock. The Warrants
expire four years from the closing date of the merger.
a21
did
not assume any material liabilities at closing other than ordinary course
accounts payable and accrued expenses. The transaction was negotiated by the
parties on an arms-length basis.
Please
see the description of Notes and the transactions pursuant to which they were
issued in Item 2.01 of this Current Report on Form 8-K.
Item
3.02. Unregistered Sales of Equity Securities.
In
connection with the merger of Merger Sub with and into ASI as described in
Item
2.01 of this Current Report on Form 8-K, a21 issued Preferred Stock and Warrants
and ArtSelect issued Notes to 24 accredited investors in connection with the
Merger Agreement.
No fees
were paid to any party in connection with the issuance of such
securities.
The
Preferred Stock was exchangeable for and the warrants are exercisable for shares
of a21’s common stock as described in Item
2.01
of this Current Report on Form 8-K. a21
issued the foregoing securities in reliance on Section 4(2) of the Securities
Act, based on the identity and number of investors.
On
May
16, 2006, the holders of Preferred Stock exchanged all the outstanding shares
of
Preferred Stock for the Exchange Stock. Pursuant
to the terms of the Exchange Agreement, the Exchange Stock will not be issued
by
a21 until it increases the number of authorized shares of its common stock
to
accommodate such exchange. No fees were or will be paid to any party in
connection with the exchange of such securities.
a21
will issue the foregoing securities in reliance on Section 4(2) of the
Securities Act, based on the identity and number of investors.
Item
5.03. Amendments to Articles of Incorporation or By-laws; Change in Fiscal
Year.
On
May
16, 2006, a21 filed a Certificate of Designation creating the Preferred Stock
and eliminating the previous series of Series A Preferred Stock, of which no
shares were outstanding. Please see the description of the Preferred Stock
in
Item 2.01 of this Current Report on Form 8-K.
Item
9.01. Financial Statements and Exhibits.
(c)
Not
applicable.
(d)
Exhibits
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Description
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3.1
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Series
A Preferred Stock Designation
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4.1
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Form
of Promissory Note dated May 15, 2006 by and among a21, ASI and each
of
the persons listed on Exhibit I to the Merger Agreement
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4.2
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Form
of Warrant dated May 15, 2006 between a21 and each of the persons
listed
on Exhibit I to the Merger Agreement
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10.1
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Merger
Agreement dated May 15, 2006, by and among a21,
Inc., AE Acquisition Corp., ArtSelect, Inc., and the common and preferred
stockholders of ArtSelect listed on Schedule I thereto and Udi Toledano
as
stockholder representative
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10.2
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Guaranty
of a21 in favor of the holders of the Promissory Notes dated May
15,
2006
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10.3
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Form
of Exchange Agreement dated May 15, 2006
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99.1
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Press
Release dated May 16, 2006
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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.
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a21,
INC. |
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By: |
/s/ Albert
H.
Pleus |
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Albert
H. Pleus |
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Chief
Executive Officer |
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| Dated: May 19, 2006 |
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EXHIBIT
INDEX
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Exhibit
Number
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Description
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3.1
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Series
A Preferred Stock Designation
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4.1
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Form
of Promissory Note dated May 15, 2006 by and among a21, ASI and each
of
the persons listed on Exhibit I to the Merger Agreement
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4.2
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Form
of Warrant dated May 15, 2006 between a21 and each of the persons
listed
on Exhibit I to the Merger Agreement
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10.1
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Merger
Agreement dated May 15, 2006, by and among a21,
Inc., AE Acquisition Corp., ArtSelect, Inc., and the common and preferred
stockholders of ArtSelect listed on Schedule I thereto and Udi Toledano
as
stockholder representative
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10.2
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Guaranty
of a21 in favor of the holders of the Promissory Notes dated May
15,
2006
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10.3
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Form
of Exchange Agreement dated May 15, 2006
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99.1
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Press
Release dated May 16, 2006
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