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): March 16, 2005
NCT Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-18267 59-2501025
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
20 Ketchum Street, Westport, CT 06880
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (203) 226-4447
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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:
|_| 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.
Item 3.02. Unregistered Sales of Equity Securities.
On March 16, 2005, NCT Group, Inc. ("NCT") entered into preferred stock purchase
agreements to sell an aggregate of 975.55767 shares of NCT's newly created
series I convertible preferred stock to four of NCT's executive officers, a
non-executive officer of NCT, a holder of shares of preferred stock of NCT's
subsidiary, Artera Group Inc., and Steven Salkind, the son of Carole Salkind,
the beneficial owner of approximately 91% of our common stock. The consummation
of these sales occurred on March 22, 2005. The series I preferred stock has a
stated value of $1,000 per share. No dividends are payable on the series I
preferred stock. The series I preferred stock is junior in rank to NCT's series
H convertible preferred stock, but senior in rank to NCT's common stock and has
preferences over the common stock with respect to distributions and payments
upon the liquidation, dissolution or winding up of NCT. The holders of series I
preferred stock have no voting rights (except as may be required by law). Each
share of series I preferred stock is convertible into approximately 47,619
shares of NCT common stock, determined by dividing the $1,000 stated value by
the fixed conversion price of $0.0210 per share. This conversion price is higher
than the fair market value of NCT common stock on March 16, 2005 of $0.0185 per
share. The 975.55767 issued and outstanding shares of NCT series I preferred
stock are convertible into approximately 46,455,127 shares of NCT common stock.
However, the series I preferred stock is not convertible until 20 days after NCT
stockholders approve an increase in the number of authorized shares of NCT
common stock.
NCT sold an aggregate of 305.55767 shares of its series I preferred stock to
four executive officers and one non-executive officer in exchange for the
forgiveness of accrued but unpaid incentive cash bonuses of $490,000 (before
income tax withholding). The specific terms of each of these five agreements are
as follows:
Net Bonus
Amount
Gross After Tax Shares
Name Bonus Amount Withholding Purchased
---- ------------ ----------- ---------
Michael J. Parrella, Chief Executive $ 125,000 $ 81,000 81
Officer and Chairman of NCT
Irene Lebovics, President of NCT 46,000 27,000 27
Cy E. Hammond, Senior Vice President 72,000 41,000 41
and Chief Financial Officer of NCT
R. Wayne Darville, Chief Operating 100,000 63,332.53 63.33253
Officer, Artera Group, Inc.
Non-Executive Officer of NCT 147,000 93,225.14 93.22514
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NCT also sold 160 shares of series I preferred stock to an individual in
exchange for 271 shares of series A convertible preferred stock of Artera Group.
Finally, NCT sold 510 shares of series I preferred stock to Steven Salkind in
exchange for the forgiveness and release of an aggregate of unpaid cash
consulting fees of $510,000 accrued through June 12, 2005. These consulting fees
were originally payable to a total of seven entities affiliated with Steven
and/or Carole Salkind, but were subsequently assigned to Steven Salkind by these
entities.
The sale of the series I convertible preferred stock was not registered under
the Securities Act of 1933, as amended, in reliance upon the exemption set forth
in Section 4(2) of the Securities Act relating to transactions by an issuer not
involving a public offering.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits:
3.1 Certificate of Designations, Preferences and Rights of Series I
Convertible Preferred Stock of NCT Group, Inc. as filed in the office
of the Secretary of State of the State of Delaware on March 15, 2005.
10.1(a) Form of Preferred Stock Purchase Agreement between NCT Group, Inc.
and certain NCT Group, Inc. executive officers.
10.1(b) Schedule of purchasers.
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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.
NCT GROUP, INC.
Date: March 22, 2005
By: /s/ Cy E. Hammond
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Cy E. Hammond
Senior Vice President and
Chief Financial Officer
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