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
Date of Report (Date of Earliest Event Reported): July 1, 2005
HALIFAX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 1-08964 54-0829246
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
5250 Cherokee Avenue, Alexandria, Virginia 22312
(Address of principal executive offices/Zip Code)
Registrant's telephone number, including area code: (703) 658-2400
Former name, former address, and former fiscal year, if changed since last
report: N/A
Check the appropriate box below if the Form 8-K filing is intended to satisfy
the filing obligation of the registrant under any of the following provisions:
[ ] 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))
Forward Looking Statements
Certain statements in this Annual Report on Form 10-K constitute "forward-
looking statements" within the meaning of the Federal Private Securities
Litigation Reform Act of 1995. While forward-looking statements sometimes are
presented with numerical specificity, they are based on various assumptions made
by management regarding future events over which we have little or no control.
Forward-looking statements may be identified by words including "anticipate,"
"believe," "estimate," "expect" and similar expressions. We caution readers
that forward-looking statements, including without limitation, those relating to
future business prospects, revenues, working capital, liquidity, and income, are
subject to certain risks and uncertainties that would cause actual results to
differ materially from those indicated in the forward-looking statements.
Factors that could cause actual results to differ from forward-looking
statements include the concentration of our revenues, risks involved in
contracting with our customers, including difficulties to accurately estimate
costs when bidding on a contract and the occurrence of start-up costs prior to
receiving revenues and contract with fixed price provisions, government
contracting risks, potential conflicts of interest, difficulties we may have in
attracting and retaining management, professional and administrative staff,
fluctuation in quarterly results, risks related to acquisitions and acquisition
strategy, continued favorable banking relationships, the availability of capital
to finance operations and ability to make payments on outstanding indebtedness,
weakened economic conditions, acts of terrorism, risks related to competition
and our ability to continue to perform efficiently on contracts, and other risks
and factors identified from time to time in the reports we file with the
Securities and Exchange Commission ("SEC"), including our Annual Report on Form
10-K. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated or projected.
Forward-looking statements are intended to apply only at the time they are
made. Moreover, whether or not stated in connection with a forward-looking
statement, the Company undertakes no obligation to correct or update a forward-
looking statement should we later become aware that it is not likely to be
achieved. If the Company were to update or correct a forward-looking statement,
you should not conclude that the Company will make additional updates or
correction thereafter.
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On June 30, 2005, we simultaneously entered into and closed on an asset
purchase agreement with INDUS Corporation pursuant to which we sold
substantially all of the assets and certain liabilities of our secure network
services business. The purchase price was approximately $12.5 million, subject
to adjustments described in the asset purchase agreement based on the net assets
of the business on the date of closing. The asset purchase agreement provides
that $3.0 million of the purchase price will be held in escrow. Of this amount,
$625,000 will be held as security for the payment of our indemnification
obligations pursuant to the asset purchase agreement, if any, and will be
released to us eighteen (18) months following the date of the asset purchase
agreement unless a certain key government contract, referred to as the Key
Contract, is not assigned (referred to as a novation) as of such time. A
portion of the escrow amount equal to $2,000,000 (which includes the portion
referenced above for indemnification obligations), plus any interest or other
income earned thereon, will also serve as security for a payment obligation we
have to INDUS Corporation if the novation of the Key Contract from us to INDUS
Corporation is not approved by such government customer and received within two
years from the date of the asset purchase agreement. If such novation of the
Key Contract is not received by the second anniversary of the date of the asset
purchase agreement or if such novation is affirmatively rejected prior to such
time under circumstances not giving rise to the rescission right referenced
below, we will be obligated to pay to INDUS Corporation an amount equal
$2,000,000 with the entire amount then held in escrow being released to INDUS
Corporation as full or partial payment of such obligation, as the case may be.
We will be obligated to pay directly to INDUS Corporation the amount, if any, by
which the balance of escrow funds at the time of disbursement is less than
$2,000,000. Finally, a portion of the escrow amount equal to $1,000,000 serves
as security for a payment obligation we have to INDUS Corporation in connection
with a failure to obtain certain consents related to the transaction. In
addition, INDUS Corporation has certain rescission rights. First, if the
government customer to the Key Contract rejects the novation of such Key
Contract on or before the six month anniversary of the date of the asset
purchase agreement and the government customer takes action to preclude us from
providing INDUS Corporation with the economic benefit of such Key Contract
(whether by subcontract or otherwise), INDUS Corporation may rescind the entire
sale transaction in lieu of being paid the $2,000,000 amount referenced above.
Second, if we are unable to provide INDUS Corporation with evidence of the
government's approval of the assignment to INDUS Corporation to a material
contract (other than the Key Contract) on or before a date roughly six months
from the date of closing, INDUS Corporation may rescind the transaction. The
asset purchase agreement contains representations, warranties, covenants and
related indemnification provisions, in each case that are customary in
connection with a transaction of this type; however, certain of the
representations and warranties require updating to a date which is the earlier
of the contract novation or thirty months from the closing. In addition,
survival periods applicable to such updated warranties may be extended together
with related indemnification periods. The secure network services business
comprised approximately $13.5 million, or 22%, and $9.5 million, or 19%, of our
revenues for the fiscal years ended 2005 and 2004 and represented 7% of our
assets at March 31, 2005.
In connection with the asset purchase agreement, we also transferred to
INDUS Corporation all of our right, title and interest in and to our Federal
Supply Service Information Technology (Schedule 70) Contract (the "Contract")
with the federal government and a Blanket Purchase Agreement ("BPA") that we
entered into with one federal agency pursuant to the Contract. Since we have a
need to utilize the Contract and BPA in connection with businesses that we have
retained, we entered into a transition services agreement with INDUS Corporation
with respect to the Contract and BPA in order to continue performing existing,
and to receive new, task/delivery orders from federal government agencies
awarded under the Contract and BPA until such time as we are awarded a new
Federal Supply Service Information Technology Contract.
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
Halifax completed the sale of assets described above on June 30, 2005. The
information contained in Item 1.01 above is hereby incorporated by reference
into this Item 2.01.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
None.
(b) Pro-forma Financial Information
Any required pro forma financial information will be filed as an
amendment to this Form 8-K within four (4) business days after the
date of the earliest event reported on this Form 8-K.
(c) Exhibits
The following exhibit is filed herewith
Exhibit
Number Description
99.1 Press Release dated July 1, 2005.
SIGNATURE
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.
HALIFAX CORPORATION
Date: July 1, 2005 By: /s/Joseph Sciacca
Joseph Sciacca
Vice President, Finance & CFO
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release July 1, 2005.