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 21, 2005
(MARCH 15, 2005)
SYSCAN IMAGING, INC.
(Exact name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
000-27773 59-3134518
(Commission File Number) (I.R.S. Employer Identification Number)
1772 TECHNOLOGY DRIVE
SAN JOSE, CALIFORNIA 95110
(Address of Principal Executive Offices, including Zip Code)
(408) 436-9888
(Registrant's Telephone Number, including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
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 (SEE General Instruction A.2 below):
|_| 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
On March 15, 2005, Syscan Imaging, Inc. (the "COMPANY") sold $1,865,000 of its
Series A Convertible Preferred Stock ("PREFERRED STOCK") to institutional and
accredited retail investors ("INVESTORS") in a private offering pursuant to
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "SECURITIES ACT"). The Company intends to use the net proceeds from
the financing for sales, marketing, research and development and for working
capital and general corporate purposes. Starboard Capital Markets, LLC, an NASD
member firm, acted as placement agent in the sale of the Preferred Stock, for
which it received $186,500 in commissions and 186,500 warrants to purchase
shares of the Company common stock, par value $.001 per share ("COMMON STOCK")
at an exercise price equal $2.00 per share. The Company also paid legal fees of
$25,000 to counsel for the Investors. The net proceeds of this offering to the
Company after the payment of commissions, fees and other expenses of the
offering were approximately $1,653,500.
In connection with the financing, the Company also issued to the Investors
common stock purchase warrants (the "WARRANTS") to purchase up to an aggregate
of 932,500 shares of the Company's Common Stock at an exercise price of $2.00
per share. The Warrants are exercisable for a period of five years from the date
of issuance. The Company has agreed, pursuant to a registration rights
agreement, to register the shares of Common Stock issuable upon conversion of
the Preferred Stock and upon exercise of the Warrants with the Securities and
Exchange Commission ("REGISTRATION RIGHTS AGREEMENT").
The following describes certain of the material terms of the financing
transaction with the Investors. The description below is not a complete
description of the material terms of the financing transaction and is qualified
in its entirety by reference to the agreements entered into in connection with
the financing which are included as exhibits to this Current Report on Form 8-K:
PREFERRED STOCK CONVERSION RIGHTS. All or any portion of the stated value of
Preferred Stock outstanding may be converted into Common Stock at anytime by the
Investors. The initial fixed conversion price of the Preferred Stock is $1.00
per share ("CONVERSION PRICE"). The Conversion Price is subject to anti-dilution
protection adjustments, on a weighted average basis, at anytime that the
Preferred Stock is outstanding and prior to the effective date of the
Registration Statement required to be filed pursuant to the Registration Rights
Agreement, upon the Company's issuance of additional shares of Common Stock, or
securities convertible into Common Stock, at a price that is less than the then
Conversion Price.
DIVIDENDS. The Preferred Stock shall accrue dividends at a rate of 5% per annum,
payable semiannually on July 1 and January 1 in cash, by accretion of the stated
value or in shares of Common Stock. Subject to certain terms and conditions, the
decision whether to accrete dividends to the stated value of the Preferred Stock
or to pay for dividends in cash or in shares of Common Stock, shall be at the
discretion of the Company.
REDEMPTION. On March 14, 2008 (the "REDEMPTION DATE"), all of the outstanding
Preferred Stock shall be redeemed for a per share redemption price equal to the
stated value on the Redemption Date (the "REDEMPTION PRICE"). The Redemption
Price is payable by the Company in cash or in shares of Common Stock at the
Company's discretion and shall be paid within five trading days after the
Redemption Date. In the event the Company elects to pay all or some of the
Redemption Price in shares of Common Stock, the shares of Common Stock to be
delivered to the Investors shall be valued at 85% of the fifteen-day volume
weighted average price of the Common Stock on the Redemption Date.
RIGHT TO COMPEL CONVERSION. If, on any date after March 14, 2006, (A) the
closing market price for a share of Common Stock for ten (10) consecutive
trading days equals at least $4.00 (subject to adjustment for certain events),
and (B) the average reported daily trading volume during such ten-day period
equals or exceeds 100,000 shares, then the Company shall have the right, at its
option, to convert, all, but not less than all, of the outstanding shares of
Preferred Stock at the Conversion Price; provided that the Registration
Statement shall be effective at all times during such 10-day period and during
the 30-day notice period to the Investors.
WARRANT TERMS. The Warrants grant Investors the right to purchase up to an
aggregate of 932,500 shares of common stock of the Company at an exercise price
of $2.00 per share. The Warrants expire on March 14, 2010 and must be exercised
by the payment of cash, except if there is no effective registration statement
covering the resale of the shares of Common Stock underlying the Warrants, at
which time an investor may exercise their Warrants on a cashless basis.
RESTRICTIONS ON CONVERSION OF PREFERRED STOCK AND EXERCISE OF WARRANT. No
individual Investor is entitled to receive shares upon payment of dividends on
the Preferred Stock, or upon conversion of the Preferred Stock held by such
Investor if such receipt would cause such Investor to be deemed to beneficially
own in excess of 4.999% of the outstanding shares of our Common Stock on the
date of issuance of such shares (such provision may be waived by such Investor
upon 61 days prior written notice to the Company). In addition, no individual
Investor is entitled to receive shares upon payment of dividends on the
Preferred Stock, or upon conversion of the Preferred Stock held by such Investor
if such receipt would cause such Investor to be deemed to beneficially own in
excess of 9.999% of the outstanding shares of our Common Stock on the date of
issuance of such shares (such provision may be waived by such Investor upon 61
days prior written notice to the Company).
None of the individual holders of the Warrants are entitled to exercise any such
Warrant held by them, if such exercise would cause such Investor to be deemed to
beneficially own in excess of 4.999% of the outstanding shares of our Common
Stock on the date of issuance of such shares
REGISTRATION RIGHTS. Pursuant to the terms of a Registration Rights Agreement
between the Investors and the Company, the Company is obligated to file a
registration statement on Form SB-2 (or if Form SB-2 is not available another
appropriate form) registering the resale of shares of the Company's Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants.
The Company is required to file the registration statement within 40 days of
March 15, 2005 and have the registration statement declared effective within 120
days of March 15, 2005. If the registration statement is not timely filed, or
declared effective within the timeframe described, or if the registration is
suspended other than as permitted, in the Registration Rights Agreement, the
Company will be obligated to pay each Investor a fee equal to 1.0% of such
Investor's purchase price of the Preferred Stock during the first 90 days, and
2.0% for each 30 day period thereafter (pro rated for partial periods), that
such registration conditions are not satisfied.
RIGHT OF FIRST REFUSAL. Subject to certain conditions, the Company has granted
the Investors a right of first refusal, for a period of one (1) year from the
effective date of the registration statement required to be filed in connection
with this transaction, to participate in any subsequent financing that the
Company conducts.
VOTING RIGHTS. Holders of the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the Company
shall not, without the affirmative vote of the holders of a majority of the
shares of the Preferred Stock then outstanding, (a) alter or change adversely
the powers, preferences or rights given to the Preferred Stock or alter or amend
the Series A Certificate of Designation, (b) authorize or create any class of
stock ranking as to dividends or distribution of assets upon a liquidation
senior to or otherwise PARI PASSU with the Preferred Stock, (c) amend its
certificate or articles of incorporation or other charter documents so as to
affect adversely any rights of the holders of the Preferred Stock, (d) increase
the authorized number of shares of Preferred Stock, or (e) enter into any
agreement with respect to the foregoing.
LIQUIDATION PREFERENCE. Upon any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary (a "LIQUIDATION"), the holders of the
Preferred Stock shall be entitled to receive out of the assets of the Company,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the stated value per share before any distribution or payment
shall be made to the holders of any securities of the Company with rights junior
to the Preferred Stock, and if the assets of the Company shall be insufficient
to pay in full such amounts, then the entire assets to be distributed to the
holders of the Preferred Stock shall be distributed among such holders ratably
in accordance with the respective amounts that would be payable on such shares
if all amounts payable thereon were paid in full.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES
See Item 1.01 of this Current Report on Form 8-K, which Item is incorporated
herein by this reference, for a description of the terms of the financing
transaction that included the issuance of Preferred Stock and Warrants, each of
which are convertible into shares of the Company's common stock.
ITEM 3.03. MATERIAL MODIFICATION TO RIGHTS OF SECURITY HOLDERS
On March 15, 2005, the Company filed a certificate of designation authorizing
the Preferred Stock.
See Item 1.01 of this Current Report on Form 8-K, which Item is incorporated
herein by this reference, for a more detailed description of the terms of the
Preferred Stock.
ITEM 7.01. REGULATION FD DISCLOSURE.
On March 15, 2005, the Company issued a press release announcing the sale of
$1,865,000 of Preferred Stock described in Item 1.01 above.
The press release is attached hereto as Exhibit 99.1 and is incorporated herein
by this reference. The press release and the information in Item 7.01 of this
Form 8-K shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, nor shall they be deemed incorporated by
reference in any filing under the Securities Act, except as shall be expressly
set forth by specific reference in such filing.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
Set forth below is a list of Exhibits included as part of this Current Report.
10.1 Form of Convertible Preferred Stock and Common Stock Warrant Purchase
Agreement entered into by and between the Company and the purchasers
10.2 Form of Common Stock Purchase Warrant
10.3 Form of Registration Rights Agreement
10.4 Certificate of Designation of Preferences, Rights and Limitations of
Series A Preferred Stock as filed with the Secretary of State of the State
of Delaware on March 15, 2005
99.1 Press Release of the Company, dated March 15, 2005, with respect to the
sale of the Series A Preferred Stock
This Current Report on Form 8-K may contain, among other things, certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including, without limitation, (i) statements
with respect to the Company's plans, objectives, expectations and intentions;
and (ii) other statements identified by words such as "may", "could", "would",
"should", "believes", "expects", "anticipates", "estimates", "intends", "plans"
or similar expressions. These statements are based upon the current beliefs and
expectations of the Company's management and are subject to significant risks
and uncertainties. Actual results may differ from those set forth in the
forward-looking statements. These forward-looking statements involve certain
risks and uncertainties that are subject to change based on various factors
(many of which are beyond the Company's control).
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.
SYSCAN IMAGING, INC.
Date: March 21, 2005 By: /s/ Darwin Hu
----------------------------
Darwin Hu, Chief Executive Officer