Section 1 – Registrant’s Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
On December 14, 2009, Digital Angel Corporation (the “Company”), Destron Fearing Corporation, a wholly-owned subsidiary of the Company (“Destron”), along with Digital Angel Technology Corporation, Digital Angel International, Inc., Fearing Manufacturing Co., Inc., and Florida Decision Corporation, all wholly-owned subsidiaries of Destron, entered into the Amendment to Letter Agreement (“Amendment”) with Laurus Master Fund, Ltd. (“Laurus”); Kallina Corporation (“Kallina”); Valens Offshore SPV I, Ltd., Valens Offshore SPV II, Corp, Valens US SPV I, LLC (together “Valens”); and Psource Structured Debt Limited (collectively, the “Lenders,” which are all affiliated) and LV Administrative Services, Inc., the administrative and collateral agent for the Lenders, to amend, among other things, the repayment schedule of all amounts owed pursuant to the terms of the Secured Term Note dated as of August 31, 2007 in the original principal amount of $7,000,000 from the Company originally in the favor of Kallina (“2007 Note”), the Secured Term Note dated as of August 24, 2006 in the original principal amount of $13,500,000 from the Company originally in the favor of Laurus (“2006 Note”), and the Senior Secured Term Note dated as of October 2, 2008 in the original principal amount of $2,000,000 from the Company in the favor of Valens (“2008 Note”), in all cases as amended or modified from time to time including pursuant to the November 26, 2008 Letter Agreement (“2008 Amendment”) as previously disclosed (collectively, the “Existing Debt Obligations”).
Under the terms of the Amendment, the Company shall pay $3,800,000 of the Existing Debt Obligations to Lenders (“Prepayment”), of which $3,000,000 has been paid in cash (which amount included the November 2009 payment) and $800,000 will be paid within three days of the date of the Amendment either in cash or through the issuance of common stock in accordance with the terms of the 2008 Amendment. After Prepayment, the balance of the Existing Debt Obligations, which is currently approximately $1,400,000, will be payable in full to Lenders on or before the original maturity date of February 1, 2010.
The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the complete text of the transactional document, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Section 2 – Financial Information
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 above with respect to the modification of the Existing Debt Obligations is incorporated herein by reference.
Section 3 – Securities and Trading Markets
Item 3.02 Unregistered Sales of Equity Securities.
Pursuant to the terms of the Amendment, as described in more detail under Item 1.01 above, we plan to issue 1,393,146 shares of our common stock on or before December 17, 2009 as payment of the $800,000 portion of the Prepayment as calculated pursuant to the 2008 Amendment. The shares of common stock will be issued in a transaction exempt from registration under Section 4(2) of the Securities Act of 1933, as amended.
Section 7 – Regulation FD
Item 7.01 Regulation FD Disclosures
On December 15, 2009, Joseph J. Grillo, the President and Chief Executive Officer of the Company, issued a letter to stockholders of the Company regarding the recent events as a press release.
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