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): February 14, 2005
Science Dynamics Corporation
(Exact name of registrant as specified in its charter)
Delaware 000-10690 22-2011859
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
7150 N. Park Drive, Suite 500
Pennsauken, NJ 08109
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (856) 910-1166
Copies to:
Gregory Sichenzia, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018
Phone: (212) 930-9700
Fax: (212) 930-9725
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 February 14, 2005, Science Dynamics Corporation (the "Company")
entered into a Securities Purchase Agreement (the "Purchase Agreement"), dated
February 11, 2005, with Laurus Master Fund, Ltd. ("Laurus") for the sale of a
$2,000,000 principal amount Secured Convertible Term Note (the "Note") and a
Common Stock Purchase Warrant (the "Warrant") to purchase 6,000,000 shares of
the Company's common stock. The sale of the Note and the Warrant were made
pursuant to the exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act"), and Regulation D
under the Securities Act.
The Company received gross proceeds of $2,000,000 from the sale of the
Note and the Warrant. The Company may only use such proceeds for (i) general
working capital purposes, (ii) no less than 80% of the equity interests of
Systems Management Engineering, Inc. ("SMEI") pursuant to the Stock Purchase
Agreement, as amended, dated as of December 16, 2004 by and among the Company,
SMEI and the shareholders of SMEI identified therein, and (iii) the acquisition
of 100% of the remaining equity interests of SMEI pursuant to a transaction in
form and substance reasonably satisfactory to Laurus.
The Note bears interest at a rate per annum equal to the prime rate
published in The Wall Street Journal from time to time, plus 3%, but shall not
be less than 8%. Interest is payable monthly in arrears commencing March 1, 2005
and on the first business day of each consecutive calendar month thereafter
until the maturity date, February 11, 2008 (each a "Repayment Date"). Amortizing
payments of the aggregate principal amount outstanding under the Note must begin
on June 1, 2005 and recur on the first business day of each succeeding month
thereafter until the maturity date (each an "Amortization Date"). Beginning on
the first Amortization Date, the Company must make monthly payments to Laurus on
each Repayment Date, each in the amount of $60,606.06, together with any accrued
and unpaid interest to date on such portion of the principal amount plus any and
all other amounts which are then owing under the Note, the Purchase Agreement or
any other related agreement but have not been paid (collectively, the "Monthly
Amount"). Any principal amount that remains outstanding on the maturity date is
due and payable on the maturity date.
If the Monthly Amount (or a portion of the Monthly Amount if not all
of the Monthly Amount is converted into shares of common stock) is required to
be paid in cash, then the Company must pay Laurus an amount equal to 102% of the
Monthly Amount due and owing to Laurus on the Repayment Date in cash. If the
Monthly Amount (or a portion of the Monthly Amount if not all of the Monthly
Amount is converted into shares of common stock) is required to be paid in
shares of common stock, the number of such shares to be issued by the Company to
Laurus on such Repayment Date (in respect of such portion of the Monthly Amount
converted into in shares of common stock), shall be the number determined by
dividing (x) the portion of the Monthly Amount converted into shares of common
stock, by (y) the then applicable fixed conversion price. The fixed conversion
price of the Note is $0.10 per share, subject to adjustment for subsequent lower
price issuances by the Company, as well as customary adjustment provisions for
stock splits, combinations, dividends and the like.
Laurus is required to convert into shares of common stock all or a
portion of the Monthly Amount due on each Repayment Date according to the
following guidelines (the "Conversion Criteria"): (i) the closing price of the
common stock as reported by Bloomberg, L.P. on the Repayment Date shall be
greater than or equal to 115% of the fixed conversion price and (ii) the amount
of such conversion does not exceed 25% of the aggregate dollar trading volume of
the common stock for the 22-day trading period immediately preceding the
applicable Repayment Date. If the Conversion Criteria are not met, Laurus must
convert only such part of the Monthly Amount that meets the Conversion Criteria.
Any part of the Monthly Amount due on a Repayment Date that Laurus has not been
able to convert into shares of common stock due to failure to meet the
Conversion Criteria, must be paid by the Company in cash at the rate of 102% of
the Monthly Amount otherwise due on such Repayment Date, within three business
days of the applicable Repayment Date.
The Warrant is exercisable at a price of $0.11 per share from the
issue date through the close of business on February 11, 2012. Upon exercise of
the Warrant, payment may be made by Laurus either (i) in cash or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate exercise price, (ii) by delivery of the Warrant, or shares of common
stock and/or common stock receivable upon exercise of the Warrant, or (iii) by a
combination of any of the foregoing methods. The exercise price of the Warrant
is subject to adjustment for stock splits, combinations, dividends and the like.
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In order to secure payment of all amounts due under the Note, as well
as the Company's other obligations to Laurus: (i) the Company granted Laurus a
lien on all of the Company's assets and also on all assets of the Company's
subsidiaries; (ii) the Company pledged all of the capital stock that it owns of
each of its subsidiaries; and (iii) each of the Company's subsidiaries executed
a Subsidiary Guaranty of such obligations.
Pursuant to the terms of a registration rights agreement, the Company
agreed to include the shares of common stock issuable upon conversion of the
Note and upon exercise of the Warrant in a registration statement under the
Securities Act to be filed not later than March 13, 2005 and to use its
reasonable commercial efforts to cause such registration statement to be
declared effective no later than May 12, 2005. In the event the Company does not
meet these deadlines, it may be required to pay Laurus liquidated damages in
cash equal to 2% for each 30-day period (prorated for partial periods) on a
daily basis of the original principal amount of the Note.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On February 14, 2005, the Company completed the acquisition of
4,177,500 shares of the outstanding common stock of Systems Management
Engineering, Inc. ("SMEI"), which shares constitute approximately 82% of the
issued and outstanding shares of capital stock of SMEI on a fully diluted basis.
As partial consideration for such shares of SMEI, the Company issued an
aggregate of 16,553,251 shares of the Company's common stock to twelve
accredited investors pursuant to Section 4(2) of the Securities Act and
Regulation D under the Securities Act. The acquisition was completed pursuant to
the terms of a Stock Purchase Agreement dated December 16, 2004, as amended,
among the Company and certain shareholders of SMEI. SMEI will continue to
operate as an independent subsidiary of the Company.
About SMEI
SMEI was incorporated on March 11, 1997 under the laws of the
Commonwealth of Virginia. SMEI was originally founded to provide the federal
government with engineering services coupled with advanced technology solutions.
SMEI has developed advanced data management applications, Internet server
technology and information systems that it markets to both public and private
sectors. SMEI's technology helps its customers reduce development time for
projects, manage the deployment of applications across the Internet to desktops
around the world and implement military grade security on all systems where the
applications are deployed. SMEI has two divisions, a consulting services
division and the Aquifer Software division.
Consulting Services Division
SMEI provides the federal government and private industry with
engineering services coupled with innovative information technology solutions.
SMEI is committed to addressing the growing public and private sector demand for
integrated, secure, enterprise class e-business solutions built on industry
standards.
SMEI has designed, developed and implemented advanced business
management applications, integration technologies and enterprise geospatial
systems. SMEI currently supports several operational systems in all of these
categories for major organizations and defense commands using web-based
technologies and the consolidation of custom and commercial off-the-shelf
software to unite dissimilar applications into integrated systems.
GIS Service Capabilities
SMEI specializes in the design and implementation of Enterprise
Geographic Information Systems ("GIS"), enabling the vision of public and
private sector clients for cross-organization data sharing. They are experts in
the development of Web services applications and secure geospatial solutions.
SMEI architected the Naval GeoReadiness Repository in support of Base
Development, Base Realignment and Closure (BRAC), the Installation Visualization
Tool (IVT) program, force protection, anti-terrorism and homeland defense.
Administered by Naval Facilities Engineering Command Headquarters (NAVFACHQ),
the GeoReadiness Repository provides installation geospatial data and imagery
storage, integration of Navy real property data, the automation of data
submission, standards compliance checking and conversion. Web services provide
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visualization, cross-services data sharing, and an advanced security model for
accessing the GIS data. SMEI performs spatial analysis and risk assessment
modeling for the military medical application. SMEI also developed GIS-R, an
Army GIS repository to provide a visual method for users to access information
from a comprehensive set of government, commercial, and installation data
sources in an expandable, user-friendly decision support application.
Implementation planning is critical to the success of Enterprise GIS
initiatives. Cross-organizational data sharing and public visualization of
corporate information through the Internet requires the understanding of data
needs across functional areas, as well as the backbone technology to support an
Enterprise approach. The SMEI team includes key in-house experts in GIS
supporting technologies such as ESRI's ArcSDE, Oracle Spatial, UNIX and Windows
to ensure a stable architecture and operating environment for enterprise
applications. As current customers of this service, the Naval Information
Technology Center (NITC) receives architectural and database support, systems
integration analysis, and technical support from SMEI.
Technical and Management Consulting Services
SMEI provides network engineering, architectural guidance, database
management, expert programming and functional area expert analysis to its
Department of Defense clients. SMEI provides strategic consulting to support
business requirements, change management, and financial analysis and metrics for
several major federal customers.
In addition, SMEI provides management, analytical, and technical
consulting to support legacy application modernization and systems reduction
goals under several major contracts including the Department of Navy's Navy
Marine Corps Intranet (NMCI).
Aquifer Software Division
SMEI develops and markets the Aquifer(TM) Application Services
Platform, a proprietary software product for application developers. Aquifer
helps developers build a new class of software called rich Internet
applications. These applications are secure custom or commercial desktop and
mobile Windows Forms applications that use the traditional client/server model
while exploiting Web Services-based communications over the Internet.
Aquifer is a .NET application platform built on a service-oriented
architecture that delivers scalable and secure Web applications to Windows
desktop and Windows CE platforms. Aquifer helps SMEI reduce development time and
manage the deployment of applications across the Internet to desktops around the
world while implementing Department of Defense ("DOD") certified and accredited
security on all deployed systems. Aquifer addresses the needs of development
organizations to more rapidly develop custom Windows Forms applications and
lower the costs to secure, deploy and maintain them. Aquifer helps organizations
solve the following problems:
o Reduction in application development time, cost and risk;
o Reduction of desktop and PDA application deployment time and cost;
o Increased richness of user experience;
o Elimination of security concerns inherent with Web browser
vulnerabilities;
o Decreased server software and hardware costs; and
o Optimization of network resources for best performance.
SMEI markets Aquifer as both a productivity tool and a secure
application platform. Whether modernizing legacy applications or building new
service-oriented, Web based systems, Aquifer is designed to shorten the time it
takes to develop and deliver custom solutions in Microsoft .NET environments.
Aquifer provides many common service components including:
o Data Access;
o Role-based User Profiles;
o Flexible Security Model including strong encryption;
o Configuration Management;
o Event Management;
o Integration Gateways; and
o Secure Client.
3
In its current version 5.4, the Aquifer Application Services Platform
can support between 500 and 1,000 concurrent active desktops against a single
server processor.
Sales and Marketing
SMEI markets its Aquifer Application Services Platform to mid to
large-sized commercial accounts, federal government agencies, systems
integrators and independent software vendors that are building Windows rich
Internet applications. Aquifer's products, training and services are focused on
the .NET Windows Forms application development market where enterprise IT
organizations and systems integrators are tasked with building and managing
applications that run on the Internet using the .NET Framework.
SMEI employs the following tactics to sell the Aquifer Application
Services Platform:
Direct Sales to Enterprise IT Organizations and Systems Integrators -
A direct sales force performs this activity. This segment includes all
new federal, systems integrator and commercial accounts. SMEI believes
that reference-ability is a key post-sale objective.
Targeted Marketing - With the help of extensive lead generation,
public relations and targeting marketing communication materials, SMEI
hopes to establish itself as a leader in the rich Internet application
development and management market with an emphasis on security over
both wired and wireless communications. The tactics include marketing
materials directed at DOD agencies, the financial services and health
care markets and other markets where strong security is a common
requirement. Print media, direct mail, trade shows/conferences and
live Web casts are the main components of lead generation for SMEI.
Strategic Alliances - SMEI plans to continue to form strategic
alliances with federal and commercial systems integrators and Web
services performance management vendors to sell SMEI's products as
value-added resellers and to enhance Aquifer's capabilities by
integrating with other vendor's performance monitoring capabilities.
SMEI believes that engaging marketing an delivery channels that are
not currently available to the company will broaden market reach,
increase delivery bandwidth in some instances, and yield a greater
return on sales and marketing expenditure.
Important partnerships SMEI has developed recently include:
o Microsoft. SMEI is a Microsoft Certified Partner. Recently,
Aquifer's security model and its presence on the Navy Marine
Corps Intranet (NMCI) network have attracted interest from
Microsoft Federal and from Microsoft Business Development in
Redmond. SMEI is currently working with Redmond to develop a
NMCI formal Microsoft/SMEI case study describing the
benefits of .NET and Aquifer.
o AmberPoint. AmberPoint is a Silicon Valley-based software
company that builds and markets management solutions for Web
services. SMEI and AmberPoint co-market products to federal
governmental agencies. SMEI plans to integrate Aquifer and
AmberPoint to help developers more easily and accurately
monitor the .NET applications they build.
SMEI's goal is to turn every Aquifer customer into a reference
account. SMEI believes that first hand testimonials describing the productivity
gains with Aquifer are of great value and can significantly enhance sales and
marketing efforts
Competition
As a company offering IT services, SMEI's services market is
fragmented and highly competitive. SMEI faces competition from companies
providing IT outsourcing and business process outsourcing solutions. SMEI also
competes with software vendors in the .NET Web Application Services Platform
market. Potential competitors of SMEI's Aquifer software include:
4
o Kinitos, Inc. delivers an enterprise deployment solution
that allows IT to maintain centralized control of existing
Windows Forms clients. The Kinitos .NET platform centralizes
control of the monitoring, deployment and updating of
existing Windows Forms client applications throughout the
network. It handles policy based client deployment and
rollback, enables real time monitoring and delivers
centralized reporting of client applications.
Kinitos also has a component that provides client-side
"plumbing" for creating Windows Forms applications. It
handles the communications from client to server, provides
online/offline services, reliable messaging, logging and
dynamic updating of client applications.
o ObjectWare, Inc. markets its IdeaBlades technology as an
application development platform for the rapid creation of
smart client applications. ObjectWare leverages Microsoft
.NET technology to streamline development, deployment and
maintenance processes while simplifying the supporting
hardware and software environments.
SMEI believes that its Aquifer platform offers more comprehensive
features and that on this basis Aquifer has a marketing and performance
advantage over competing products. SMEI believes that its Aquifer DOD certified
and accredited security technology not only creates an advantage over
competitors, but also creates a strong barrier to entry. The following chart
demonstrates the competitive features in Aquifer and those features currently
available from the above competitors.
- ------------------------------------------------------- ----------- ----------- ---------------
Application Service Aquifer Kinitos ObjectWare
- ------------------------------------------------------- ----------- ----------- ---------------
Configuration Management Yes Yes Yes
- ------------------------------------------------------- ----------- ----------- ---------------
Data Access Yes No Yes
- ------------------------------------------------------- ----------- ----------- ---------------
DITSCAP Approved Security Yes No No
- ------------------------------------------------------- ----------- ----------- ---------------
Active Directory Support Yes No No
- ------------------------------------------------------- ----------- ----------- ---------------
Event Management Yes Yes No
- ------------------------------------------------------- ----------- ----------- ---------------
User, Account and Application Management Yes No No
- ------------------------------------------------------- ----------- ----------- ---------------
Management Console Yes No No
- ------------------------------------------------------- ----------- ----------- ---------------
Execute multiple applications per client instance Yes Yes No
- ------------------------------------------------------- ----------- ----------- ---------------
Multi-platforms (e.g., Win 32, Win CE) Yes N/A N/A
- ------------------------------------------------------- ----------- ----------- ---------------
Performance Management Partner No No
- ------------------------------------------------------- ----------- ----------- ---------------
Intellectual Property
On November 12, 2003, SMEI filed an application with the United States
Patent and Trademark Office for a trademark of the name "Aquifer." On December
21, 2004 the United States Patent and Trademark Office issued trademark serial
number 78326540 for the name "Aquifer." SMEI has not yet received the
Certificate of Registration.
The description of the trademark as submitted is as follows:
International Class: 009
Computer application software that allows end-users to use applications and
developers to create new applications and move non-web based legacy applications
to web based applications that can operate on the Internet.
Employees
As of February 14, 2005, SMEI had 26 full time employees and one part
time employee. None of SMEI's employees are covered by a collective bargaining
agreement. SMEI considers relations with its employees to be good.
5
Description of Property
SMEI currently subleases a facility located at 12100 Sunset Hills
Road, Reston, Virginia 20191. The facility is comprised of 9,342 square feet of
office space. The sublease is pursuant to a Sub-Sublease Agreement dated June
22, 2001. The sublease commenced July 15, 2001 and ends September 30, 2005. SMEI
currently pays $18,289.81 per month under the sublease, which is subject to a 3%
increase in July 2005.
Legal Proceedings
Neither the Company nor SMEI is currently a party to, nor is any of
the Company's or SMEI's property currently the subject of, any pending legal
proceeding. None of the Company's directors, officers or affiliates is involved
in a proceeding adverse to the Company's business or has a material interest
adverse to the Company's business.
Risk Factors
There was no Formal Valuation Determining the Fairness of the Consideration for
the Acquisition of SMEI.
The consideration for the acquisition of SMEI was determined by arms'
length negotiations between the Company's management and the management of SMEI,
but there was no formal valuation of SMEI by an independent third party. The
Company did not obtain a fairness opinion by an investment banking firm or other
qualified appraiser. Since the acquisition of SMEI did not require the approval
of the Company's stockholders, the Company is unable to determine whether its
stockholders would have agreed with the determination by the Company's Board of
Directors that the terms of the acquisition were fair and in the best interests
of the stockholders.
The Company may not be Able to Effectively Integrate SMEI, Which Would be
Detrimental to the Company's Business.
Acquisitions involve numerous risks, including potential difficulty in
integrating operations, technologies, systems, and products and services of
acquired companies, diversion of management's attention and disruption of
operations, increased expenses and working capital requirements and the
potential loss of key employees and customers of acquired companies. In
addition, acquisitions involve financial risks, such as the potential
liabilities of the acquired businesses, the dilutive effect of the issuance of
additional equity securities, the incurrence of additional debt, the financial
impact of transaction expenses and the amortization of goodwill and other
intangible assets involved in any transactions that are accounted for by using
the purchase method of accounting, and possible adverse tax and accounting
effects. Any of the foregoing could materially and adversely affect the
Company's business.
Failure to Properly Manage the Company's Potential Growth Would be Detrimental
to the Company's Business.
Any growth in the Company's operations will place a significant strain
on its resources and increase demands on management and on operational and
administrative systems, controls and other resources. There can be no assurance
that the Company's existing personnel, systems, procedures or controls will be
adequate to support the Company's operations in the future or that the Company
will be able to successfully implement appropriate measures consistent with its
growth strategy. As part of this growth, the Company may have to implement new
operational and financial systems, procedures and controls to expand, train and
manage its employee base and maintain close coordination among technical,
accounting, finance, marketing and sales staffs. The Company cannot guarantee
that it will be able to do so, or that if it is able to do so, the Company will
be able to effectively integrate them into its existing staff and systems. The
Company may fail to adequately manage its anticipated future growth. The Company
will also need to continue to attract, retain and integrate personnel in all
aspects of operations. Failure to manage growth effectively could hurt the
Company's business.
6
Management of the Company Subsequent to the Acquisition of SMEI
The following are the names and certain information regarding the
Company's Directors, Director Nominees and Executive Officers following the
acquisition of SMEI. The Company plans to appoint the Director Nominees to the
Company's Board of Directors approximately ten days after the date the Company
transmits to all holders of record of the Company's common stock information
required by Rule 14f-1 under the Securities Exchange Act of 1934, as amended.
There are no family relationships among any of the Company's Directors, Director
Nominees and Executive Officers.
- ---------------------- ------- -------------------------------------------------
Name Age Position
- ---------------------- ------- -------------------------------------------------
Paul Burgess 40 President, Chief Executive Officer and Director
- ---------------------- ------- -------------------------------------------------
Alan C. Bashforth 54 Acting Chief Financial Officer, Secretary and
Chairman of the Board of Directors
- ---------------------- ------- -------------------------------------------------
Eric D. Zelsdorf 39 Chief Technology Officer and Director Nominee
- ---------------------- ------- -------------------------------------------------
Herbert B. Quinn 68 Director Nominee
- ---------------------- ------- -------------------------------------------------
Robert E. Galbraith 61 Director Nominee
Background of Executive Officers and Directors
Paul Burgess, President, Chief Executive Officer and Director. From
March 1, 2003 until February 14, 2005, Mr. Burgess was Chief Operating Officer
of the Company. As of February 9, 2005, Mr. Burgess was appointed President and
Chief Executive Officer of the Company. On February 14, 2005, Mr. Burgess was
appointed a director of the Company. From January 2000 to December 2002, Mr.
Burgess was President and Chief Financial Officer of Plan B Communications.
Prior to Plan B Communications, Mr. Burgess spent three years with MetroNet
Communications, where he was responsible for the development of MetroNet's coast
to coast intra and inter city networks. Mr. Burgess was also influential in
developing the operations of MetroNet during the company's early growth stage.
Prior to joining MetroNet, Mr. Burgess was with ISM, a company subsequently
acquired by IBM Global Services, where he was responsible for developing and
deploying the company's distributed computing strategy.
Alan C. Bashforth, Acting Chief Financial Officer, Secretary and
Chairman of the Board of Directors. From April 4, 2002 to February 9, 2005, Mr.
Bashforth was President, Chief Executive Officer and the sole Director of the
Company. Mr. Bashforth continues to serve as a Acting Chief Financial Officer,
Secreatary, director and as Chairman of the Board of Directors of the Company.
Mr. Bashforth has been a member of the Company's Board of Directors since
November 1996. Since 1996, Mr. Bashforth has held various executive officer
positions with the Company. From the end of 1996 to December 15, 2000, Mr.
Bashforth was President of Cascadent Communications, a major customer of the
Company. Previously he was President of Innovative Communications Technology,
Ltd. ("ICT"), a data communications company located in Jersey, Channel Islands,
until the acquisition of the intellectual property of ICT by the Company in
November 1996.
Eric D. Zelsdorf, Chief Technology Officer and Director Nominee. Mr.
Zelsdorf founded SMEI in 1997 and since then he has been the Chief Technology
Officer, President and a Director of SMEI. Mr. Zelsdorf has led SMEI since its
inception and currently advises clients as well as industry standards groups on
the implementation of secure Web services and enterprise architecture and
integration. From 1992 to 1997, Mr. Zelsdorf was Vice President and Chief
Technology Officer for ECG, Inc.
Herbert B. Quinn, Director Nominee. Mr. Quinn has been Chairman and
Chief Executive Officer of SMEI since 1998 when he led the merger of Energy and
Environmental Technologies into SMEI. Mr. Quinn is a retired Army Brigadier
General, former Senior Executive for the EPA and a registered Professional
Engineer.
Robert E. Galbraith, Director Nominee. Mr. Galbraith is currently a
consultant to firms seeking innovative technical solutions in the security
marketplace. Areas in which Mr. Galbraith have consulted include: data
encryption, internet telephony (VoIP), intelligent data recording, secure local
and wide area network solutions, physical security and biometric security. Prior
7
to consulting, Mr. Galbraith was President, owner and technical administrator of
Secure Engineering Services, Inc. ("SESI") from its inception in 1979 until the
firm was sold in 1996. During this period, SESI provided services and equipment
to the U.S. Forces and NATO component Forces in Europe. Clients included the
U.S. Army, Navy and Air Force, the SHAPE Technical Center, Euro Fighter Program,
Sandia Labs, JPL, MITRE and NATO programs.
Certain Relationships and Related Transactions
The Company has not entered into any transaction during the last two
years and the Company has not proposed any transaction to which it was or is to
be a party, in which any of the following persons had or is to have a direct or
indirect material interest:
- Any director or executive officer of the Company;
- Any nominee for election as a director;
- Any security holder named in the "Security Ownership of Certain
Beneficial Owners and Management" section below; and
- Any member of the immediate family (including spouse, parents,
children, siblings, and in-laws) of any such person.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of February 17,
2005 with respect to the beneficial ownership of the outstanding common stock by
(i) any holder of more than five (5%) percent; (ii) each of the Company's
executive officers and directors; and (iii) the Company's directors and
executive officers as a group. Except as otherwise indicated, each of the
stockholders listed below has sole voting and investment power over the shares
beneficially owned.
Common Stock Percentage of
Name of Beneficial Owner (1) Beneficially Owned (2) Common Stock (3)
- ---------------------------------- ------------------------- -------------------
Alan C. Bashforth (4) 14,048,363 14.9%
Paul Burgess (5) 4,000,000 4.4%
Herbert B. Quinn, Jr. (6) 6,604,424 7.7%
Eric D. Zelsdorf 5,835,606 6.8%
- ---------------------------------- ------------------------- -------------------
All officers, directors and 30,488,393 31.0%
directors nominees as a group
(4 persons)
* Less than 1%
(1) Except as otherwise indicated, the address of each beneficial owner is c/o
Science Dynamics Corporation, 7150 N. Park Drive, Suite 500, Pennsauken, NJ
08109.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to the shares shown. Except where indicated
by footnote and subject to community property laws where applicable, the
persons named in the table have sole voting and investment power with
respect to all shares of voting securities shown as beneficially owned by
them.
(3) Based on 86,239,910 shares outstanding.
(4) Includes: (a) 165,000 shares owned directly by Mr. Bashforth; (b) 1,520,000
shares owned by Innovative Communications Technology, Ltd., which is
controlled by Mr. Bashforth; (c) 4,363,363 shares owned by Calabash
Holdings Ltd., which is controlled by Mr. Bashforth; (d) options owned by
Calabash Holdings Ltd. to purchase 2,000,000 shares exercisable at $0.05
per share; and (e) options owned by Calabash Holdings Ltd. to purchase
6,000,000 shares exercisable at $0.10 per share.
(5) Includes (a) options to purchase 2,000,000 shares of common stock
exercisable at $0.03 per share; and (b) options to purchase 2,000,000
shares of common stock exercisable at $0.05 per share.
(6) Includes 370,515 shares owned by Elizabeth L. Quinn, spouse of Herbert B.
Quinn, Jr.
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Item 2.03 Creation of a Direct Financial Obligation.
See Item 1.01 above.
Item 3.02 Unregistered Sales of Equity Securities
See Item 1.01 and Item 2.01 above.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
See Item 2.01 above.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of business acquired.
To be filed by amendment no later than 71 calendar days after February
14, 2005.
(b) Pro forma financial information.
To be filed by amendment no later than 71 calendar days after February
14, 2005.
(c) Exhibits.
Exhibit Number
Description
- -------------- ------------------------------------------------------------
2.1 Stock Purchase Agreement dated December 16, 2004 among
Science Dynamics Corporation, Systems Management
Engineering, Inc. and the shareholders of Systems Management
Engineering, Inc. identified on the signature page thereto
(Incorporated by reference to Form 8-K filed with the
Securities and Exchange Commission on December 22, 2004)
2.2 Amendment No. 1 to Stock Purchase Agreement dated December
16, 2004 among Science Dynamics Corporation, Systems
Management Engineering, Inc. and the shareholders of Systems
Management Engineering, Inc. identified on the signature
page thereto (Incorporated by reference to Form 8-K filed
with the Securities and Exchange Commission on February 11,
2005)
4.1 Securities Purchase Agreement dated February 11, 2005 by and
between Science Dynamics Corporation and Laurus Master Fund,
Ltd.
4.2 Secured Convertible Term Note dated February 11, 2005 issued
to Laurus Master Fund, Ltd.
4.3 Common Stock Purchase Warrant dated February 11, 2005 issued
to Laurus Master Fund, Ltd.
4.4 Master Security Agreement dated February 11, 2005 among
Science Dynamics Corporation, M3 Acquisition Corp., SciDyn
Corp. and Laurus Master Fund, Ltd.
4.5 Stock Pledge Agreement dated February 11, 2005 among Laurus
Master Fund, Ltd., Science Dynamics Corporation, M3
Acquisition Corp. and SciDyn Corp.
4.6 Subsidiary Guaranty dated February 11, 2005 executed by M3
Acquisition Corp. and SciDyn Corp.
4.7 Registration Rights Agreement dated February 11, 2005 by and
between Science Dynamics Corporation and Laurus Master Fund,
Ltd.
10.1 Sub-Sublease Agreement made as of June 22, 2001 by and
between Software AG and Systems Management Engineering, Inc.
10.2 Microsoft Partner Program Agreement
10.3 AmberPoint Software Partnership Agreement
9
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.
Science Dynamics Corporation
Date: February 18, 2005 /s/ Alan C. Bashforth
---------------------
Alan C. Bashforth
Acting Chief Financial Officer
and Secretary