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 OF 1934
April 20, 2004
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Date of Report (Date of earliest event reported)
SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP.
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(Exact name of registrant as specified in its charter)
Delaware 80-0025175
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
91 Hill Avenue NW,
Fort Walton Beach, Florida 32548
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(Address of principal executive offices, including zip code)
(850) 796-0909
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report
ITEM 5. OTHER EVENTS AND REQUIRED FD DISCLOSURE.
On April 20, 2004, Spectrum Sciences & Software Holdings Corp. (the
"Company") announced that it had signed a Letter of Intent dated March 31, 2004
(the "LOI"), with Inland Fabricators, LLC, a Louisiana-based company engaged in
large-scale pipe fabrication for government and private sector companies
("IFAB"), pursuant to which the Company proposes to acquire all of the issued
and outstanding membership interests of IFAB from its members (the "Members"),
or acquire IFAB by merger with a subsidiary of the Company. The LOI is not
binding, and the transaction is subject to the execution of a definitive
acquisition agreement by the parties.
The Company will issue shares of its common stock to the Members in
consideration for their interests in IFAB. The Company will place 4,000,000
shares of common stock in escrow, and the shares will be released from escrow in
the amounts and from time to time based on the following formula:
To be released from escrow on January 15, 2005 ("Year 1 Release Date"):
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Seven hundred and fifty thousand shares plus 0.5 shares for every dollar of
EBITA (earnings before interest, tax, depreciation and amortization) over
$1,500,000 attributed to IFAB's operations for the year ended December 31, 2004,
2005;
To be released from escrow on January 15, 2006 ("Year 2 Release Date"):
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Seven hundred and fifty thousand shares plus 1.0 shares for every dollar of
EBITA (earnings before interest, tax, depreciation and amortization) over
$1,500,000 attributed to IFAB's operations for the year ended December 31, 2005;
To be released from escrow on January 15, 2007 ("Year 3 Release Date"):
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Seven hundred and fifty thousand shares plus 1.5 shares for every dollar of
EBITA (earnings before interest, tax, depreciation and amortization) over
$1,500,000 attributed to IFAB's operations for the year ended December 31, 2006.
The parties have agreed that the aggregate number of shares to be released
from escrow on Year 1 Release Date, Year 2 Release Date, and Year 3 Release Date
(the "Consideration") will not be less than 2,250,000 shares, and will not be
more than 4,000,000 shares.
In the event IFAB's revenues exceed the Company's for three (3) consecutive
years, the Members, at their option, and subject to the Company's shareholders'
consent, may separate IFAB from the Company via a spin out transaction pursuant
to terms to be specified in the definitive agreements.
If, during the period commencing on the closing date of the Company's
acquisition of the membership interests, and ending six months after Year 3, the
average of the three (3) lowest closing bid prices per share (appropriately
adjusted for any stock split, dividends or combinations) of the Company common
stock during any consecutive forty (40) trading days is equal to less than $1,
then IFAB will have the option to repurchase IFAB for one and a half (1 1/2)
times (i) the Consideration then paid to IFAB (valued at the time of the
release), and (ii) any capital invested into IFAB by the Company. IFAB can
repurchase IFAB with cash or the Company's common stock.
The Company will make a one-time nonrefundable payment to IFAB in the
amount of $25,000 upon execution of the LOI, which will be used by IFAB to pay
legal, accounting, and technical personnel to perform a due diligence review of
all the Company's public filings, financial statements, and operating
facilities.
The Company will also make available $750,000 as a line of credit to IFAB
for working capital at the closing of the definitive agreement. The Company will
have a security interest in all IFAB's assets at closing subordinate to its then
current secured parties and Robert Genovese ("Genovese"), and a lien on all
assets acquired with the line of credit subordinate to Genovese's security
interests. The Company will first obtain a loan from Genovese in the principal
amount of $750,000, bearing an interest rate of 4%. The Company will use these
funds for the line of credit.
The Company is obligated to issue Genevose, pursuant to the amended and
restated consulting agreement, discussed below, options to acquire five (5)
million shares of the Company's common stock for procuring the LOI transaction,
further due diligence assistance, and in assisting the Company in negotiating
the terms and the closing of the definitive agreement.
On April 16, 2004, the Company and Genovese agreed to amend and restate
their March 11, 2004 consulting agreement (the "Amended Agreement"). The Amended
Agreement (1) extends the term of the original consulting agreement from March
11, 2005 to April 19, 2006, and (2) contains an exclusivity provision pursuant
to which Genovese is prohibited from consulting with other companies on merger
and acquisition matters during the term of the Amended Agreement. Further, the
Company will award Genovese additional consideration, in its discretion, if,
during the terms of the Amended Agreement, Genovese submits suitable merger or
acquisition candidates which, in the aggregate, have revenues equal to or
exceeding $100,000,000 dollars. Pursuant to the Amended Agreement, Genovese will
be issued options to acquire an additional 9,000,000 shares of the Company's
common stock at an exercise price equal to the greater of $1.95, or sixty
percent (60%) of the closing price of the Company's common stock on the day
immediately preceding Genovese's notice to exercise. Genovese will also be
issued options to acquire five (5) million shares of the Company's common stock
for past and future services performed and to be preformed in connection with
the IFAB transaction. The exercise rights of Genovese are limited so that,
unless Genovese gives written notice 75 days in advance to the Company of his
intention to exceed the Limitation on Conversion as defined below, with respect
to all or a specified amount of the option and the corresponding number of the
underlying shares, in no instance is Genovese (singularly, together with any
Persons who in the determination of Genovese, together with Genovese, constitute
a group as defined in Rule 13d-5 of the Exchange Act) be entitled to exercise
the option to the extent such exercise would result in Genovese beneficially
owning more than five percent (5%) of the outstanding shares of common stock of
the Company (the "Limitation on Conversion").
As of March 11, 2004, the board of directors approved and adopted a 2004
Non-Statutory Stock Option Plan (the "Plan"). On April 16, 2004, the board of
directors amended and restated the Plan by increasing the number of common stock
shares underlying the options from 10,000,000 to 30,000,000. The Company will
prepare and file a registration statement on Form S-8 for 20,000,000 common
stock shares underlying the options.
For information regarding the terms and conditions of the LOI, including
the conditions to the completion of the LOI, reference is made to the LOI
attached as Exhibit 2.1 hereto and incorporated by reference herein, and the
press release issued by the Company on April 20, 2004, which is filed as Exhibit
99.1 hereto and incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
Exhibit
No. Document
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2.1 Letter of Intent dated March 31, 2004 between the Registrant and
Inland Fabricators, LLC.
10.1 Amended and Restated Consulting Agreement dated April 16,
2004 between the Registrant and Robert Genovese
99.1 Press release of the Registrant issued on April 20, 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.
Spectrum Sciences & Software Holdings Corp.
By: /s/ William H. Ham, Jr.
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William H. Ham, Jr.
Chief Executive Officer
Date: April 20, 2004