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): January 31, 2005
WARP TECHNOLOGY HOLDINGS, INC.
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(Exact Name of Registrant as Specified in Charter)
Nevada 000-33197 88-0467845
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(State of Incorporation) (Commission File No.) (I.R.S.
Employer
Identification
Number)
151 Railroad Avenue, Greenwich, Connecticut 06830
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(Address of Principal Executive Offices)
(203) 422-2950
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(Registrant's Telephone Number, including area code)
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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 A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
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SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
AMENDMENT TO GUPTA PURCHASE AGREEMENT.
Warp Technology Holdings, Inc. ("Warp" or the "Company") has entered
into a material agreement related to the acquisition of Gupta Technologies, LLC
("Gupta"), a software company producing secure, small-footprint, embeddable
databases and enterprise application development tools.
As previously reported, Warp Technology Holdings, Inc. ("Warp" or the
"Company") has entered into that certain Purchase Agreement Assignment and
Assumption (the "Assignment"), as of October 13, 2004, by and between ISIS
Capital Management, LLC ("ISIS") and the Company. Under the Assignment, Warp
acquired all of the rights and assumed all of the liabilities of the Purchaser
under that certain Membership Interest Purchase Agreement (as amended by the
Extension, the "Purchase Agreement") made and entered into as of September 2,
2004, by and between ISIS Capital Management, LLC (as the "Purchaser") and Gupta
Holdings, LLC (the "Seller"). The Purchase Agreement was amended by that certain
Extension Agreement (the "Extension"), by and between ISIS and the Seller, dated
as of September 27, 2004, which was amended by that certain Amendment No. 1 To
Extension Agreement made by and between ISIS and the Seller, as of the 13th day
of October, 2004, and which was further amended by that certain Amendment No. 2
To Extension Agreement made by and between Warp and the Seller, as of December
8, 2004, and which was further amended by that certain Amendment No. 3 To
Extension Agreement made by and between Warp and the Seller, as of January 3,
2005 (together, as amended, the "Extension").
Warp and the Seller negotiated further changes to the Purchase
Agreement, and entered into that certain Amendment to Membership Interest
Purchase Agreement, as of January 31, 2005 (the "Amendment"). Under the
Amendment, the purchase price for the acquisition of all of the membership
interests in Gupta was amended from the purchase price set forth in the Purchase
Agreement, and modified under the Extension. Under the Amendment, the purchase
price was changed to provide for a total consideration paid to the Seller of
$21,000,000, with no further purchase price adjustments. Previously, the
purchase price was estimated to be a total of $23,500,000, comprised of the
$20,000,000 purchase price, plus interest due on the unpaid amount of the
purchase price (which was estimated to exceed $500,000), a working capital
adjustment for any excess in the net working capital of Gupta on the Closing
date compared to the net working capital shown on the unaudited pro forma
consolidated balance sheet of Gupta dated May 31, 2004 (which was anticipated to
exceed $1,500,000), and the $1,500,000 convertible promissory note issued by the
Company to the Seller on December 8, 2004 (the "Original Gupta Note"). The
Amendment provides for the amendment and restatement of the Original Gupta Note,
into that certain Amended and Restated $1,500,000 Subordinated Secured
Promissory Note issued by the Company to Gupta Holdings, LLC, on January 31,
2005 (the "Gupta Note").
FINANCING AGREEMENTS.
SERIES C SUBSCRIPTION AGREEMENT.
The Company entered into those certain Series C Subscription Agreements
(collectively, the "Subscription Agreement"), as of January 31, 2005, by and
between the Company and the Investors as identified therein (collectively, the
"Investors"). Under the Subscription Agreement, the Company sold certain Series
C Convertible Notes (the Series C Notes") which will be convertible into a new
series of Preferred Stock, the "Series C Preferred Stock" with a par value of
$.00001 per share, and Warrants to acquire Common Stock, par value $.00001 per
share.
Upon (i) the Closing of the acquisition of Gupta under the Purchase
Agreement, and (ii) the effectiveness of the Amendment (as defined below) and
the Certificate of Designations of the Series C Stock (the "Certificate"), all
amounts due under the Series C Notes (principal and interest which accrues at 6%
per annum) will automatically convert into (i) such number of Shares of Series C
Stock equal to the amount due under the Series C Note divided by $1.00 (the
"Closing Price"), and (ii) Warrants (the "Warrants") to acquire the number of
shares of Common Stock equal to the number of Shares of Series C Stock.
Upon receipt of the requisite stockholder consents, the Company will
file an amendment to its Certificate of Incorporation (the "Amendment")
authorizing sufficient Common Stock and Series C Stock as may be required to be
issued under the Subscription Agreement. Upon the filing and effectiveness of
the Amendment, the Company will file the Certificate of Designations (the
"Certificate"), designating the rights, preferences and other terms of the
Series C Stock.
In the event that the Series C Notes are not converted by the maturity
date (which is 45 days after the issue date, which was January 31, 2005), the
Company will be required to pay to the Investors on such Maturity Date a penalty
in cash equal to ten percent (10%) of the principal amount of the Series C
Notes.
The Series C Stock will be convertible into Common Stock at a
conversion price (the "Applicable Conversion Price") that will initially be
equal to the Closing Price, subject to adjustment pursuant to the anti-dilution
protections described below, and other terms set forth in the Certificate.
The holders of shares of Series C Stock will be entitled to receive
dividends, at a 6% annual rate, payable quarterly in arrears in cash or, subject
to standard certain conditions described in the Certificate, in shares of Common
Stock.
Any unconverted and non-redeemed Shares of Series C Stock outstanding
on the third anniversary of the initial issuance of the Series C Stock, will be
redeemed on that date, in cash, at a price per share equal to the Series C Face
Amount, plus all accrued but unpaid dividends thereon. The "Series C Face
Amount" shall be that price per Share equal to the Closing Price per Share,
subject to equitable
adjustment for all stock splits, stock dividends, or similar events involving a
change in the capital structure of the Company.
Warrants for 100% of the number of shares of Common Stock that the
stated value of Series C Stock would buy at the Closing Price will be issued to
the Investors upon conversion of the Series C Notes. The Warrants shall have an
exercise price of $1.25. The Warrants shall have a five-year term.
Investors in the Series C Notes, as well as the Senior Noteholders and
the Subordinated Noteholders, as defined below, will have those registration
rights described set forth in that certain Investors' Agreement (the "Investors'
Agreement") entered into the 31st day of January, 2005 by and among the Company,
and the persons listed on Exhibit A thereto. The Investors' Agreement provides
that the Company will file to register the shares of Common Stock issuable upon
conversion of the Series C Stock, issuable upon exercise of the Warrants, or
issuable upon exercise of the Warrants issued to the Senior Noteholders and the
Subordinated Noteholders (collectively, the "Conversion Shares").
The Company agreed to file such registration statement within
forty-five (45) days after the closing of the financing transactions, complete
all required audits and make all related filings concerning the acquisition of
Gupta. Within fifteen (15) days after the end of such 45-day period, the Company
agreed to file a registration statement for the purpose of registering all of
the Conversion Shares for resale, and to use its best efforts to cause such
registration statement to be declared effective by the Securities and Exchange
Commission (the "SEC") at the earliest practicable date thereafter.
If (i) the registration statement has not been filed with the SEC by
the filing deadline or (ii) the registration statement has not been declared
effective by the SEC before the date that is ninety (90) days after the filing
deadline or, in the event of a review of the Registration Statement by the SEC,
one hundred and twenty (120) days after the filing deadline, or (iii) after the
registration statement is declared effective, the registration statement or
related prospectus ceases for any reason to be available to the investors and
noteholders as to all Conversion Shares the offer and sale of which it is
required to cover at any time prior to the expiration of the effectiveness
period (as defined in the Investors' Agreement) for an aggregate of more than
twenty (20) consecutive trading days or an aggregate of forty (40) trading days
(which need not be consecutive) in any twelve (12) month period, the Company
will pay to the Investors an amount in cash equal to 2% of the Series C Face
Amount of the Series C Preferred Stock and 2% of the face value of the Senior
and Subordinated Notes, and will continue to pay such 2% monthly penalties every
thirty days until such registration statement is filed, declared effective and
available to the investors.
In the event the Company issues, at any time while Shares of Series C
Stock are still outstanding, shares of Common Stock or any type of securities
convertible or exchangeable for, or otherwise giving a right to acquire, shares
of Common Stock at a price below the Applicable Conversion Price, the Investor
shall be extended full-
ratchet anti-dilution protection on the Series C Stock and any Warrants
outstanding at such time.
For as long as any Shares of Series C Stock are outstanding, the
Investors holding such Shares shall have a right of participation in any new
equity fund raising offerings undertaken by the Company, pro rata in accordance
with the Shares held.
Provided that at least twenty-five percent (25%) of the initially
issued shares of Series C Stock remain outstanding, the Company will not issue
variable priced equity or variable priced equity linked securities, without the
consent of the holders of a majority of the Series C Stock then outstanding.
If the Company's market capitalization based on the shares of Common
Stock outstanding (including all shares of Common Stock underlying the Shares of
Series C Stock on an as converted basis) exceeds $50,000,000, the shares of
Common Stock underlying the Series C Stock are registered, and the Company has
an average daily trading volume for 20 consecutive trading days of 100,000
shares per day, then Company may require the holders of Series C Stock convert
the Series C Stock into Common Stock at the then Applicable Conversion Price.
SENIOR NOTE AND WARRANT PURCHASE AGREEMENT.
The Company has entered into that certain Senior Note and Warrant
Purchase Agreement (the "Senior Note Agreement"), as of January 31, 2005, by and
among the Company and the Purchasers (the "Senior Noteholders") identified
therein. Under the Senior Note Agreement, the Company sold Senior Secured
Promissory Notes (the "Senior Notes") in the aggregate principal amount of
$6,850,000. The Senior Note bear interest at an annual rate, equal to 10.0%,
with interest payments due quarterly in arrears; (ii) will be due and payable in
full at the maturity date, which will be six months after the closing of the
Gupta Acquisition; and (iii) are secured by a security interest in substantially
all of the Company's assets.
In addition to the Senior Notes, subject to the filing of the
Amendment, the Senior Noteholders received warrants to purchase shares of Warp
common stock (the "Senior Lender Warrants"). Upon the effectiveness of the
filing of the Amendment, the Senior Lender Warrants will be for an aggregate of
2,670,000 shares of Common Stock. The Warrants will have a strike price of
$1.25, and will have a five year term.
SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT.
The Company has entered into that certain Subordinated Note and Warrant
Purchase Agreement (the "Subordinated Note Agreement"), as of January 31, 2005,
by and among the Company and the Purchasers (the "Subordinated Noteholders")
identified therein. Under the Subordinated Note Agreement, the Company sold
Subordinated Secured Promissory Notes (the "Subordinated Notes") in the
aggregate principal amount of $4,000,000. For these purposes, the Subordinated
Notes include the Gupta Note. The Subordinated Notes bear interest at an annual
rate, equal to 10.0%, with interest payments due quarterly in arrears; (ii) will
be due and payable in full at the maturity date, which will be two
years (or with respect to the Gupta Note, one year) after the closing of the
Gupta acquisition; and (iii) are secured by a security interest in substantially
all of the Company's assets, subordinated to the security interest of the Senior
Noteholders.
The Subordinated Noteholders (other than the holder of the Gupta Note)
have the right to convert all principal amounts due under the Subordinated Notes
into such number of Shares of Common Stock equal to the principal amount due
under the Series C Note divided by $1.00.
In addition to the Subordinated Notes, subject to the filing of the
Amendment, the Subordinated Noteholders received warrants to purchase shares of
Warp common stock (the "Subordinated Lender Warrants"). Upon the effectiveness
of the filing of the Amendment, the Subordinated Lender Warrants will be for an
aggregate of 2,500,000 shares of Common Stock. The Warrants will have a strike
price of $1.25, and will have a five year term.
COLLATERAL AND SECURITY AGREEMENTS.
In order to secure the payments under the Senior Notes and the
Subordinated Notes, the Company has entered into the Senior Security Agreement,
the Subordinated Security Agreement, the Collateral Agency Agreement, and the
Intercreditor and Subordination Agreement all of which are attached hereto as
Exhibits. In addition, the Company's subsidiaries Warp Solutions, Inc., and,
upon the closing of the acquisition, Gupta, have each entered into the Senior
Subsidiary Security Agreement, the Subordinated Subsidiary Security Agreement,
the Senior Guaranty, the Subordinated Guaranty, the Collateral Agency Agreement,
and the Intercreditor and Subordination Agreement all of which are attached
hereto as Exhibits. Also, the Company and such Subsidiaries have entered into
that certain Post Closing Agreement, undertaking to complete certain matters
concerning the security interests and rights granted to the Noteholders and the
Collateral Agent.
SECTION 2 - FINANCIAL INFORMATION
ITEM 2.01 COMPLETION OF ACQUISITION
(a)
Pursuant to the Purchase Agreement described above, on January 31,
2005, the Company completed the acquisition of all of the membership interests
in Gupta, from the Seller.
(b)
In acquiring the membership interests in Gupta Technologies, LLC, Gupta
has become a direct subsidiary of the Company, and Gupta's subsidiaries have
become indirect subsidiaries of the Company.
(c)
The Seller was Gupta Holdings, LLC, a Delaware limited liability
company. Prior to the transactions effected under the Purchase Agreement,
pursuant to which the Seller became an owner of certain of
the Company's securities, the Seller had no relationship to the Company.
(d)
Under the Purchase Agreement, as amended by the Extension and the
Amendment, the total consideration paid to the Seller of $21,000,000, consisting
of: (i) Fifteen Million Seven Hundred Fifty Thousand Dollars ($15,750,000) (the
"Cash Payment"), against which the Two Million Two Hundred Fifty Thousand
Dollars ($2,250,000) previously paid to Seller as a non-refundable fee pursuant
to the Extension Agreement was credited; (ii) $750,000 Senior Note and related
Senior Lender Warrant; (iii) $1,500,000 Gupta Note; (iv) $2,000,000 Series C
Note; and (v) the Company's provision of a $1,000,000 Secured Promissory Note
issued by an Investor, ISIS Capital Management, LLC ("ISIS") to the Seller
(which ISIS agreed to issue in exchange for a $1,000,000 Series C Note from the
Company). ISIS is a limited liability company whose managing members are Rodney
A. Bienvenu, Jr. ("Bienvenu"), the Company's Chief Executive Officer and
Chairman of the Company's Board of Directors, and Ernest C. Mysogland
("Mysogland"), the Executive Vice President and Chief Legal Officer of the
Company.
SECTION 3 - SECURITIES AND TRADING MARKETS
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
As disclosed above in Item 1.01, on January 31, 2005 the Company
entered into agreements pursuant to which it sold Series C Notes, which are
convertible into Series C Stock, and Warrants to acquire Common Stock. The
Company issued total aggregate principal amount of Series C Notes equal to
$8,475,000. In addition, certain notes in the aggregate principal amount of
$2,250,000 issued previously by the Company in order to fund the Non-Refundable
Fees paid to the Seller (which were credited against the purchase price at the
closing of the acquisition of Gupta), were converted into an aggregate of
$2,409,253 of Series C Notes. Upon the effectiveness of the filing of the
Amendment and the Certificate, all amounts of principal and interest due under
the Series C Notes will convert into shares of Series C Stock, plus Warrants.
Accordingly, the Company will issue a minimum of 10,884,253 shares of Series C
Stock (which will be convertible into an equal number of shares of the Company's
Common Stock) plus such additional amount necessary to convert any accrued
interest on the Series C Notes. In addition, such Investors will receive
Warrants to purchase 10,844,253 shares of Common Stock.
As disclosed above in Item 1.01, on January 31, 2005 the Company
entered into a Senior Note Agreement, pursuant to which it sold Senior Notes and
Senior Lender Warrants. The Senior Lender Warrants allow the Senior Noteholders
to acquire, in the aggregate, 2,670,000 shares of Common Stock (subject to the
effectiveness of the Amendment), at an exercise price of $1.25 per share.
As disclosed above in Item 1.01, on January 31, 2005 the Company
entered into a Subordinated Note Agreement, pursuant to which it sold
Subordinated Notes and Subordinated Lender Warrants. The Subordinated Lender
Warrants allow the Subordinated Noteholders to acquire, in the aggregate,
2,500,000 shares of Common Stock (subject to the
effectiveness of the Amendment), at an exercise price of $1.25 per share. In
addition, the Subordinated Noteholders (other than the holder of the Gupta Note)
have the right to convert all principal amounts due under the Subordinated Notes
into such number of Shares of Common Stock equal to the principal amount due
under the Series C Note divided by $1.00. Accordingly, the Subordinated
Noteholders have the right to convert their Subordinated Notes into 2,500,000
shares of Common Stock.
In connection with the various sales of the Series C Notes, the Senior
Notes and the Subordinated Notes, the Company has incurred brokers or finders
fees and commissions of a total of $833,250 and warrants (subject to the
effectiveness of the Amendment) to acquire 903,250.
All of these sales of securities were made in reliance upon the exemption from
the registration provisions of the Securities Act of 1933, as amended (the
"Securities Act"), set forth in Sections 4(2) thereof and the rules and
regulations under the Securities Act, including Regulation D, as transactions by
an issuer not involving any public offering and/or sales to a limited number of
purchasers who were acquiring such securities for their own account for
investment purposes and not with a view to the resale or distribution thereof.
ITEM 9.01 UNREGISTERED SALES OF EQUITY SECURITIES
(c) Exhibits.
Exhibit
Number Description Of Document
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4.03# Form of Amended and Restated $1,500,000
Subordinated Secured Promissory Note
issued by the Company to Gupta Holdings,
LLC, on January 31, 2005.
4.04# Form of Senior Secured Promissory Note
issued January 31, 2005 by the Company
under the Senior Note and Warrant
Purchase Agreement, by and between the
Company and the Purchasers identified
therein.
4.05# Form of Initial Warrant and Additional
Warrant to be issued under the Senior
Note and Warrant Purchase Agreement, by
and between the Company and the
Purchasers identified therein.
4.06# Form of Subordinated Secured Promissory
Note issued January 31, 2005 by the
Company under the Subordinated Note and
Warrant Purchase Agreement, by and
between the Company and the Purchasers
identified therein.
4.07# Form of Warrant to be issued under the
Subordinated Note and Warrant Purchase
Agreement, by and between the Company and
the
Exhibit
Number Description Of Document
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Purchasers identified therein.
4.08# Form of Convertible Promissory Note
issued January 31, 2005 by the Company
pursuant to the Subscription Agreement by
and between the Company and the Investors
identified therein.
10.31* Purchase Agreement Assignment and
Assumption as of October 13, 2004, by and
between ISIS Capital Management, LLC and
Warp Technology Holdings, Inc., including
Membership Interest Purchase Agreement,
Extension Agreement, and Amendment No. 1
to Extension Agreement, incorporated by
reference to Exhibit 10.31 to the
Quarterly Report on Form 10-QSB filed by
the Company on November 15, 2004.
10.33# Amendment No. 2 to Extension Agreement,
by and between the Company and Gupta
Holdings, LLC.
10.34# Amendment No. 3 to Extension Agreement,
by and between the Company and Gupta
Holdings, LLC.
10.35# Amendment to Membership Interest Purchase
Agreement, made and entered into as of
January 31, 2005, by and between the
Company and Gupta Holdings, LLC.
10.36# Form of Series C Subscription Agreement
entered into January 31, 2005 by and
between the Company and the Investors as
identified therein.
10.37# Investors' Agreement entered into the
31st day of January, 2005 by and among
the Company, and the persons listed on
Exhibit A thereto.
10.38# Senior Note and Warrant Purchase
Agreement, as of January 31, 2005, by and
among the Company and the Purchasers
identified therein.
10.39# Subordinated Note and Warrant Purchase
Agreement, as of January 31, 2005, by and
among the Company and the Purchasers
identified therein.
10.40# Senior Security Agreement, dated as of
January 31, 2005, between the Company and
Collateral Agent (as defined therein).
10.41# Senior Security Agreement, dated as of
January 31, 2005, between Warp Solutions,
Inc. and Collateral Agent (as defined
therein).
10.42# Senior Security Agreement, dated as of
January 31, 2005, between Gupta
Technologies, LLC and Collateral Agent
(as defined therein).
Exhibit
Number Description Of Document
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10.43# Senior Guaranty, dated as of January 31,
2005, between Warp Solutions, Inc. and
Collateral Agent (as defined therein).
10.44# Senior Guaranty, dated as of January 31,
2005, between Gupta Technologies, LLC and
Collateral Agent (as defined therein).
10.45# Subordinated Security Agreement, dated as
of January 31, 2005, between the Company
and Collateral Agent (as defined
therein).
10.46# Subordinated Subsidiary Security
Agreement, dated as of January 31, 2005,
between Warp Solutions, Inc. and
Collateral Agent (as defined therein).
10.47# Subordinated Subsidiary Security
Agreement, dated as of January 31, 2005,
between Gupta Technologies, LLC and
Collateral Agent (as defined therein).
10.48# Subordinated Guaranty, dated as of
January 31, 2005, between Warp Solutions,
Inc. and Collateral Agent (as defined
therein).
10.49# Subordinated Guaranty, dated as of
January 31, 2005, between Gupta
Technologies, LLC and Collateral Agent
(as defined therein).
10.50# Intercreditor and Subordination Agreement
dated as of January 31, 2005, by and
among: the Subordinated Noteholders, the
Senior Noteholders, the Company, Warp
Solutions, Inc., Gupta Technologies,
LLC, and the Collateral Agent (as such
terms are defined therein).
10.51# Collateral Agency Agreement made as of
January 31, 2005 by and among the
Collateral Agent (as defined therein) and
the Noteholders (as defined therein).
10.52# Post Closing Agreement, dated as of
January 31, 2005, by and among the Credit
Parties and the Collateral Agent (as such
terms are defined therein).
* Incorporated herein by reference.
# Filed herewith.
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.
Dated: February 3, 2005
WARP TECHNOLOGY HOLDINGS, INC.
By: /s/ Ernest C. Mysogland
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Name: Ernest C. Mysogland
Title: Executive Vice President,
Chief Legal Officer and Secretary