SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
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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) November 11, 2004
ESSENTIAL REALITY, INC.
(Exact name of Registrant as Specified in Charter)
Nevada 000-32319 33-0851302
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(State of Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
15-15 132nd Street, College Point, New York 11356
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code (718) 747-1500
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(Former Name or Former Address, if Changed Since Last Report)
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)
Item 1.01 Entry into a Material Definitive Agreement
On November 11, 2004 Alliance Distributors Holding, Inc., a wholly owned
operating subsidiary of the Company ("Alliance"), entered into a Financing
Agreement with Rosenthal & Rosenthal Inc. ("Rosenthal") which replaces the
factoring agreement. Under the Agreement, Rosenthal may in its discretion lend
up to $5 million to Alliance based on eligible inventory and receivables. All
borrowings are due on demand, are secured by substantially all of the assets of
Alliance and are subject to the Company's compliance with certain financial
covenants. The Agreement terminates on November 30, 2007 unless sooner
terminated by Rosenthal on 30 days' notice. Interest on outstanding borrowings
is payable at a variable rate per annum, equal to the prime rate (but not less
than 4.75 percent) plus 2.00 percent. The Company's CEO and the Company's
President signed limited guaranties in respect of borrowings under the
Agreement. In connection with the Agreement, the Company issued to Rosenthal the
warrant described in Item 3.02 of this Report on Form 8-K.
The foregoing summary of certain terms of the Agreement is qualified by
reference to the actual terms of the instruments that are included as exhibits
with this filing.
Item 2.02. Results of Operations and Financial Condition.
On November 15, 2004, the Registrant announced its third quarter results
for the three and nine months ended September 30, 2004. The press release
regarding this announcement is attached hereto as Exhibit 99.1.
Item 3.02 Unregistered Sales of Equity Securities.
On November 11, 2004 the Company issued to Rosenthal & Rosenthal ("Rosenthal") a
warrant (the "Warrant") to purchase 500,000 shares of common stock at $0.10 per
share.
(a) The Warrants may be exercised for cash or on a cashless basis (i.e., by
deducting from the number of shares otherwise issuable on exercise a number of
shares that have a then market value equal to the exercise price) All share and
dollar amounts in this Item 3.02 give effect to the proposed 1 for 44 reverse
split of common stock that is referred to in the Form 14C that the Company filed
on October 26, 2004.
(b) The Warrant was issued in order to induce Rosenthal to enter into the
Financing Agreement referred in Item 1.01 of this Report.
(c) The Warrant was issued in a private placement under the exemption set forth
in Section 4(2) of the Securities Act of 1933 Act (the "Act"). The Company
agreed to register the shares issuable on exercise of the Warrant.
(d) The Warrant expires on November 30, 2010. On notice by the Company the
Warrants will expire earlier if the closing price of the common stock during a
period designated in the Warrants is not less than $0.40 per share.
The foregoing summary of certain terms of the Warrant is qualified by reference
to the actual terms of the instrument that is included as an exhibit with this
filing.
Item 9.01. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits Furnished
4.1 Form of Warrant issued to Rosenthal & Rosenthal
10.1 Form of Financing Agreement
10.2 Form of Security Agreement
10.3 Form of Guaranty
10.4 Form of Registration Rights Agreement
99.1 Press Release dated November 15,2004
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.
ESSENTIAL REALITY, INC.
Date: November 15, 2004 By: /s/ Jay Gelman
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Name: Jay Gelman
Title:Chairman and
Chief Executive Officer