SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 9, 1999
SAC TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Minnesota 1-13463 41-1741861
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(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
4444 West 76th Street, Suite 600
Edina, MN 55435
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(Address of principal executive office)
Registrant's telephone number, including area code: (612) 835-7708
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N/A
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS.
SAC Technologies, Inc. (the "Company") and The Shaar Fund Limited, a
private international investment fund (the "Fund") completed a private financing
transaction on July 9, 1999 which yielded gross proceeds to the Company of
$875,000. Pursuant to a Securities Purchase Agreement between the parties, the
Fund purchased 13,125 shares of the Company's newly designated Series A 9%
Convertible Preferred Stock (the "Series A Shares") together with five year
warrants (the "Warrants") to purchase 131,250 shares of common stock, $.01 par
value per share ("Common Stock"). The Company is obligated to file a
registration statement with the United States Securities and Exchange Commission
(the "Commission") permitting the public resale of the shares of Common Stock
issuable upon conversion or exercise, as applicable, of the Series A Shares and
Warrants. In connection with this financing, the Fund forever released the
Company from the event of default resulting from the Company's shares being
delisted from the NASDAQ SmallCap Market. Below is a more detailed description
of the material components of this financing transaction.
Series A Shares
The Board of Directors of the Company authorized the issuance of 13,125
shares of Preferred Stock to be designated as "Series A 9% Convertible Preferred
Stock". The Series A Shares have a liquidation preference of $100 per share
payable prior to and in preference to the Company's Common Stock. The Series A
Shares were sold at an approximate 33% discount to the $100 per share
liquidation preference per share for an aggregate purchase price of $875,000.
The Series A Shares provide for a cumulative dividend at the rate of 9%
per annum payable in arrears semi-annually on June 15 and December 15. At the
option of the Company, the dividends are payable in cash or shares of restricted
Common Stock. The restricted Common Stock issued in payment of such dividends is
issuable at the Conversion Price (as defined below) in effect on the date the
dividend is paid.
The Series A Preferred Shares are convertible at the option of the
holder into shares of restricted Common Stock at a Conversion Price equal to the
lesser of (i) 110% of the closing bid price of the Company's Common Stock on
July 8, 1999; and (ii) 78% of the average of the closing bid prices of the
Company's Common Stock as reported on the OTC Electronic Bulletin Board during
the five trading days immediately preceding the date of conversion. The
Conversion Price is subject to adjustment in the event that the Company issues
any options or other convertible securities without consideration or for
consideration per share less than the Effective Conversion Price in effect on
the date of issuance. The Effective Conversion Price is equal to the Conversion
Price in effect on such date multiplied by .67 (representing the original issue
discount applicable to the Series A Shares). The number of shares issuable upon
conversion of the Series A Shares, in payment of dividends thereon or exercise
of the Warrants is limited such that the Company has no obligation to issue such
shares to the extent that such issuance would result in the holder of such
Series A Shares being deemed the beneficial owner of in excess of 9.99% of the
Company's outstanding shares of Common Stock.
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The Company has the right to redeem the Series A Shares in whole or in
part at $100 per Series A Share so long as (i) the Company's Common Stock is
eligible for quotation and trading on the OTC Electronic Bulletin Board, a
national securities exchange or the NASDAQ Stock Market; and (ii) the shares of
Common Stock issuable upon conversion of the Series A Shares are subject to an
effective registration statement permitting their resale under the Securities
Act of 1933, as amended (the "Securities Act"). Other than provided by
applicable law, holders of the Series A Shares have no voting rights.
Warrants
In connection with issuance of the Series A Shares, the Company issued
Warrants to the Fund to purchase 131,250 shares of Common Stock at an exercise
price equal to 110% of the average closing bid prices of the Company's common
stock during the five (5) trading days ending July 8, 1999). The Warrants have a
term of five (5) years and are immediately exercisable. The exercise price and
number of shares issuable upon exercise of the Warrants are subject to
proportional adjustment in the event of a stock split, stock dividend,
reclassification, recapitalization, merger or consolidation effecting the
Company's Common Stock. The exercise of the Warrants is limited such that the
Company has no obligation to issue any shares upon any exercise to the extent
that any exercise would result in the holder of the Warrants being the
beneficial owner of in excess of 9.99% of the Company's outstanding shares of
Common Stock.
Registration Rights Agreement
The Company also entered into a registration rights agreement with the
Fund which requires the Company to file a registration statement covering the
public resale of the Common Stock issuable upon conversion or exercise, as
applicable, of the Series A Shares and Warrants by no later September 7, 1999
and have such registration statement declared effective by no later than
December 6, 1999. In the event that the Company either fails to file the
registration statement or have such registration statement declared effective by
the dates set forth above, it is subject to a fine equal to two percent (2%) of
the liquidation preference of the Series A Shares outstanding on such date. In
the event that the Company fails to have such registration statement filed or
declared effective within thirty (30) days after the dates set forth above, it
is subject to an additional fine equal to three percent (3%) of the liquidation
preference of all Series A Shares outstanding on such date and an additional
three percent (3%) of such liquidation preference for each thirty (30) day
period thereafter.
Waiver of Event of Default
The Fund is the holder of the Company's outstanding Subordinated 5%
Convertible Debenture (the "Debenture") in the outstanding principal amount of
approximately $1,500,000. On or about May 24, 1999, the Company's Common Stock
was delisted from trading on the NASDAQ SmallCap Market. The delisting
constituted an event of default under the Debenture which provided the Fund with
the right to accelerate all outstanding indebtedness due under the Debenture. On
or about May 27, 1999, the Fund waived its right under the Debenture to
accelerate such indebtedness as a result of the Company's shares being delisted
from the NASDAQ Stock Market for a period of thirty (30) days. In connection
with this financing, the
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Fund permanently waived the event of default and any and all right it has to
accelerate the outstanding indebtedness due under the Debenture as a result of
the Company's shares being delisted from the NASDAQ SmallCap Stock Market.
ITEM 7. EXHIBITS
Exhibit Description
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3.4 Certificate of Designation of Series A 9% Convertible
Preferred Stock
10.20 Registration Rights Agreement by and between the
Registrant and The Shaar Fund Ltd. dated July 9, 1999
10.21 Securities Purchase Agreement by and between the Registrant
and The Shaar Fund Ltd. dated July 9, 1999
10.22 Form of Warrant granted to The Shaar Fund Ltd.
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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 thereunto duly authorized.
Dated: July 22, 1999 SAC TECHNOLOGIES, INC.
BY:/s/Barry M. Wendt
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Barry M. Wendt
Chief Executive Officer
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EXHIBIT INDEX
Exhibit Description
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3.4 Certificate of Designation
10.20 Registration Rights Agreement by and between the Registrant
and The Shaar Fund Ltd. dated July 9, 1999
10.21 Securities Purchase Agreement by and between the Registrant
and The Shaar Fund dated July 9, 1999
10.22 Form of Warrant granted to The Shaar Fund.