U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): May 1, 2003
BUYERS UNITED, INC.
(Exact name of registrant as specified in its charter)
0-26917
(Commission File No.)
Delaware 87-0528557
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
14870 Pony Express Road, Bluffdale, Utah 84065
(Address of principal executive offices)
(801) 320-3300
(Registrant's telephone number)
Not Applicable
(Former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
On December 6, 2002, Buyers United, Inc. entered into the Asset Purchase
Agreement and Software License Agreement to purchase assets of I-Link, Inc., and
its subsidiary, I-Link Communications, Inc., and license in perpetuity software
developed by I-Link for the operation of a real-time Internet protocol
communications network (RTIP Network). The transaction was closed effective May
1, 2003.
The assets acquired include dedicated equipment required for operating the
RTIP Network, customers of I-Link serviced through the network, and certain
trademarks. In consideration for the assets and software license, Buyers United
issued to I-Link 246,430 shares of Series B Convertible Preferred Stock, assumed
certain liabilities, and agreed to issue an additional 53,570 shares of Series B
Convertible Preferred Stock in equal monthly installments over a term of 10
months commencing June 1, 2003, subject to satisfaction of certain conditions
pertaining to provisioning of one of the former I-Link customers acquired in the
transaction.
Assuming the additional 53,570 shares are issued to I-Link, Buyers United
will have 853,800 shares of Series B Convertible Preferred Stock outstanding.
The Series B Preferred Stock is senior to the common stock with respect to
payment of dividends and distributions in liquidation. Holders of the Series B
Preferred Stock are entitled to receive dividends payable semi-annually equal to
8 percent of the liquidation preference value of the Series B Preferred Stock,
which is $10.00 per share. No dividends or distributions may be made with
respect to the common stock unless all dividend payments on the Series B
Preferred Stock are current. Each share of Series B Preferred Stock is
convertible at the election of the holder to five shares of common stock,
subject to adjustment in certain circumstances to prevent dilution of the equity
interest of the holders of the Series B Preferred Stock. Buyers United may
convert the Series B Preferred Stock to common stock when the market price of
Buyers United common stock is $4.00 or more during 30 consecutive trading days.
The Series B Preferred Stock does not have voting rights. Under the Asset
Purchase Agreement Buyers United may redeem the Series B Preferred Stock issued
to I-link at the liquidation preference value after December 5, 2007. Assuming
all of the shares of Series B Preferred Stock are issued to I-Link and converted
to common stock, I-Link would hold approximately 12.11 percent of the
outstanding common stock of Buyers, without giving effect to the exercise of
conversion or purchase rights under any other outstanding shares of preferred
stock, options, or warrants.
In connection with the closing, the parties together with Counsel
Corporation, an Ontario corporation, and Counsel Communications LLC, a Delaware
limited liability company, both affiliates of I-Link, entered into a
Reimbursement Agreement pursuant to which Counsel Corporation, Counsel
Communications, and I-Link agreed to reimburse Buyers United for any loss
sustained as a result of any claims asserted against the assets acquired from
I-Link by certain creditors of I-Link, and out of the shares it received in the
transaction I-Link deposited in escrow 40,000 shares of Series B Preferred Stock
that may be applied to reimburse any such loss. This is in addition to 25,000
shares of Series B Preferred Stock I-Link received in the transaction that it
deposited in escrow under the Asset Purchase Agreement to satisfy any claims for
indemnification under the Asset Purchase Agreement.
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Item 7. Financial Statements and Exhibits
Financial Statements and Pro Forma Financial Information
The financial statements of the acquired business and pro forma financial
information giving effect to the transactions are not included in this report
and shall be filed by amendment not later than 60 days after the date that this
initial report on Form 8-K must be filed.
Exhibits
Copies of the following documents are included as exhibits to this report
pursuant to Item 601 of Regulation S-B.
SEC Ref. No Title of Document Location
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10.1 Asset Purchase Agreement dated December 6, 2002, with I-Link *
Communications, Inc. and I-Link Incorporated, without exhibits
10.2 Reimbursement Agreement dated April 30, 2003, with Counsel Attached
Corporation, Counsel Communications LLC, I-Link
Communications, Inc. and I-Link Incorporated
99.1 Press Release dated May 1, 2003 Attached
* This document was filed with the Securities and Exchange Commission on April
14, 2003, as Exhibit No. 10.10 to the Annual Report on Form 10-KSB of Buyers
United for the year ended December 31, 2002, and is incorporated herein by this
reference.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BUYERS UNITED, INC.
Date: May 8, 2003 By: /s/ Paul Jarman, President
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