SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 2, 2005
INSYNQ, INC.
(Exact name of registrant as
specified in its charter)
Nevada 0-22814 22-3894506
(State or other (Commission File Number) IRS Employer Identification
(jurisdiction of Number)
incorporation)
1127 BROADWAY PLAZA #202 98402
TACOMA, WASHINGTON
(Address of principal executive offices) (Zip code)
(253) 284-2000
(Registrant's telephone number, including area code)
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 240.13c-4(c)
This document contains a total of 3 pages.
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On February 28, 2005, Insynq, Inc., a Nevada corporation (the
"Company"), entered into a Securities Purchase Agreement dated February 28, 2005
(the "Agreement") with AJW Partners, LLC, AJW Offshore, Ltd., AJW Qualified
Partners, LLC, and New Millennium Capital Partners II, LLC (collectively, the
"Investors"). The closing of the transaction occurred on February 28, 2005.
Under the Agreement, the Company issued and sold to the Investors: (a)
8% convertible secured notes (the "Notes") in the aggregate amount of
$2,700,000; (b) 300 shares of Series B Convertible Preferred Stock ("Series B
Preferred Stock"), with a stated value of $1,000 per share; and (c) and warrants
(the "Warrants") to acquire 5,550,000 shares of common stock. The aggregate
purchase price for the convertible notes, Series B Preferred Stock, and the
warrants was $2,700,000. The following is a summary of the terms of this
transaction.
The Notes are due three years after the issuance. They bear interest at
the rate of 8% per annum payable quarterly in cash, with 3 months interest
following the issuance date payable on the issuance date. However, no interest
will be charged in any month in which the reported intraday trading price is
greater than $.0063 for each trading day of that month. The notes are
immediately convertible into shares of the Company's common stock during the
term. The conversion price is equal to the lesser of: (a) $.0075; and (b) the
average of the lowest three intraday trading prices during the 20 days
immediately prior to the conversion date, discounted by 40%. The conversion
price is subject to adjustment on the occurrence of certain events specified in
the Notes. In the event of default under the Notes, the Investors have the right
to have the Notes redeemed at 130% of the aggregate amount of their outstanding
principal balance, plus accrued and unpaid interest, plus any default interest
and other penalty payments due. In addition, the Notes provide for default
interest at the rate of 15% per annum if any amounts due under the Notes are not
paid when due. At the option of the Investors, such redemption payments may be
made in shares of common stock. If certain conditions are satisfied, the Company
may elect to prepay the Notes at a premium. The premium will range from 125-150%
of the outstanding principal balance plus accrued and unpaid interest, plus any
default interest and other penalty payments due, depending on when the
prepayment occurs.
For the Series B Preferred Stock, the Investors will be entitled to
receive cumulative dividends equal to 6% per annum, payable quarterly in cash,
and will have a liquidation preference over other holders of capital stock of
the Company. The shares of Series B Preferred Stock are immediately convertible
into shares of common stock at a conversion price equal to the average of the
lowest three intraday trading prices during the 20 days immediately prior to the
conversion date, discounted by 14%. The conversion price is subject to
adjustment on the occurrence of certain events. Except as required under Nevada
General Corporation Law or as provided in the Certificate of Designations,
Preferences, and Rights of Series B Preferred Convertible Stock filed with the
Nevada Secretary of State on February 25, 2005 (the "Certificate of
Designations"), the holders of Series B Preferred Stock have no voting rights.
Upon the occurrence of certain events, holders of a majority of the shares of
Series B Preferred Stock may require the Company to redeem the shares of
Preferred Stock at a premium. If certain conditions are satisfied, the shares of
Series B Preferred Stock are redeemable by the Company in cash three years after
the issue date at an amount equal to 130% of the aggregate amount of their
stated value, accrued and unpaid dividends, any conversion default payments, and
other penalty payments.
The Warrants are exercisable during a 5 year term from the date of
issuance into shares of common stock at an exercise price equal to $.0075 and
$.0095 per share. Cashless exercise is permitted.
The Investors also have registration rights with respect to the shares
of common stock issuable upon the conversion of the Notes, the Series B
Preferred Stock, and the Warrants (collectively, the "Conversion Shares"). The
Company is obligated to file a registration statement within 45 days after the
closing date of the transaction, and to obtain effectiveness on the registration
within 90 days. If the Company fails to timely file or obtain effectiveness of
the registration statement, if the registrable securities cannot be sold
pursuant to the registration statement, or if the common stock ceases to be
traded on the over-the-counter bulletin board or other similar exchange, it will
incur penalties equal to 2% per month of
the aggregate amount of the outstanding principal balance of the Notes and the
stated value of the Series B Preferred Stock.
The Company also granted to the Investors a security interest in the
Company assets, pursuant to a Security Agreement and Intellectual Property
Security Agreement.
Under the Agreement, the Company agreed to various covenants. The
issuance of the conversion shares is subject to the Company amending its
Articles of Incorporation to increase the number of authorized shares to an
amount that would be sufficient to validly issue all of the conversion shares.
Accordingly, the Company is obligated to promptly take steps to so amend its
Articles of Incorporation. In addition, among other covenants, for a certain
period of time the Company agreed not to obtain certain additional equity
financing without the consent of a majority-in-interest of the Buyers and the
Company granted the Investors the first option to participate in future
offerings. The Agreement provides for liquidated damages, payable in cash or
shares of common stock, in the event of a breach by the Company of covenant or
representation or warranty.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
The Company became obligated to issue up to approximately 2,845,084,884 shares
of common stock issuable upon the exercise of the Notes, the Series B Preferred
Stock, and the Warrants held by the Investors, as discussed in item 1.01 above.
Additional shares of Common Stock may be issuable upon the occurrence of certain
invents, such as events of default. The Company did not use any underwriter in
connection with these transactions, and the transactions are exempt from
registration pursuant to ss. 4(2) of the Securities Act of 1933 and Rule 506 as
promulgated thereunder.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION
In connection with the issuance of the Series B Preferred Stock, the
Company filed the Certificate of Designations as described in Exhibit 4.01.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS
EXHIBIT DESCRIPTION OF DOCUMENT
4.1. Certificate of Designations, Preferences, and Rights of Series B
Convertible Preferred Stock
4.2 Securities Purchase Agreement
4.3 Form of Callable Secured Convertible Note
4.4 Form of Stock Purchase Warrant
4.5 Registration Rights Agreement
4.6 Intellectual Property Security Agreement
4.7 Guaranty and Pledge Agreement
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.
INSYNQ, INC.
By: /s/ John P. Gorst
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John P. Gorst,
Date: March 7, 2005 Chief Executive Officer,