UNITED STATES
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) SEPTEMBER 21, 2004
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MARKLAND TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
FLORIDA
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(State or Other Jurisdiction of Incorporation)
000-28863 84-1331134
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(Commission File Number) (IRS Employer Identification No.)
#207
54 DANBURY ROAD
RIDGEFIELD, CT 06877 06877
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(Address of Principal Executive Offices) (Zip Code)
(203) 894-9700
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(Registrant's Telephone Number, Including Area Code)
n/a
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(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))
TABLE OF CONTENTS
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PAGE
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Items 1.01; 2.01 Entry into a Material Definitive Agreement;
and 3.02 Creation of a Direct Financial Obligation;
and Unregistered Sale of Equity Securities 2
Exhibit Index 3
Signatures 4
Exhibit 99.1
Exhibit 99.2
Exhibit 99.3
Exhibit 99.4
Exhibit 99.5
Exhibit 99.6
Exhibit 99.7
Exhibit 99.8
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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This report on Form 8-K contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. We intend the forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements in these
sections. All statements regarding our expected financial position, business and
financing plans are forward-looking statements. These statements can sometimes
be identified by our use of forward-looking words such as "may," "will,"
"should," "expect," "anticipate," "project," "designed," "estimate," "plan" and
"continue." Although we believe that our expectations in such forward-looking
statements are reasonable, we cannot promise that our expectations will turn out
to be correct. These forward-looking statements generally relate to plans and
objectives for future operations and are based upon reasonable estimates and
assumptions regarding future results or trends. These forward-looking statements
are subject to certain risks, uncertainties and assumptions relating to Markland
Technologies, Inc. ("Markland", the "Company", "we" or "our"). Factors that
could cause actual results to differ materially from Markland expectations
include the uncertainty regarding Markland's ability to repay existing
indebtedness, lack of continuing operations, possible inability of Markland to
continue in business and other risks detailed from time to time in Markland's
SEC reports. No assurance can be given that investors of Markland will retain
any level of value. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, the Company's
future performance and actual results of operations may vary significantly from
those anticipated, projected, believed, expected, intended or implied. The
Company undertakes no obligation to update any of the forward-looking
statements, which speak only as of the date they were made.
ITEMS 1.01, 2.01 AND 3.02 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT; CREATION
OF A DIRECT FINANCIAL OBLIGATION AND UNREGISTERED SALE OF EQUITY SECURITIES
On September 21, 2004, Markland Technologies, Inc. (the "Company" or
"we") entered into a Purchase Agreement with DKR Soundshore Oasis Holding Fund,
Ltd. and DKR Soundshore Strategic Holding Fund, Ltd. (together the "Investors")
pursuant to which we sold warrants to purchase shares of common stock (the
"Warrants") and secured convertible promissory notes (the "Convertibles Notes")
for the aggregate consideration of $4,000,000. The offer and sale of these
securities was made in reliance on Section 4(2) of Securities Act of 1933, as
amended. The Investors are stockholders of the Company and "accredited
investors" within the meaning of Regulation D. We intend to use the proceeds
from this offering for working capital.
The Purchase Agreement contains standard representations, covenants and
events of default. Occurrence of an event of default allows the Investors to
accelerate the payment of the Convertible Notes and/or exercise other legal
remedies, including foreclosing on collateral. A copy of the Purchase Agreement
is attached hereto as Exhibit 99.1.
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The Warrants entitle the Investors to purchase an aggregate of
5,200,000 shares of our common stock, at any time and from time to time, through
September 21, 2009. The Form of Warrant is attached hereto as Exhibit 99.5.
The Convertible Notes are in the aggregate principal amount of five
million two hundred thousand dollars ($5,200,000) and accrue interest daily at
the rate of eight percent (8%) per year on the then outstanding and unconverted
principal balance of the Convertible Notes. Under the terms of the Convertible
Notes, we are required to pay $4,000,000 of the outstanding principal and
interest by March 15, 2005, and the remaining outstanding balance by September
21, 2005. At anytime, and at the option of the Investors, the outstanding
principal and accrued interest of the Convertible Notes may be converted into
shares of our common stock. The Form of Convertible Note is attached hereto as
Exhibit 99.4.
We have granted a security interest in and a lien on substantially all
of our assets to the Investors pursuant to the terms of a Security Agreement,
dated September 21, 2004. The Security Agreement is attached hereto as Exhibit
99.2.
In connection with this transaction, and pursuant to the Registration
Rights Agreement dated September 21, 2004, we have agreed to prepare and file
with the Securities and Exchange Commission a registration statement covering
the resale of all of the shares of our common stock issuable upon conversion of
the Convertible Notes and the exercise of the Warrants. The Registration Rights
Agreement is attached hereto as Exhibit 99.3.
Also in connection with this transaction, we entered into a Lock-Up
Agreement dated September 21, 2004, with James, LLC, the holder of 17,627
shares of our Series D Convertible Preferred Stock (the "Series D Shares"),
pursuant to which James LLC has agreed not to sell any Series D Shares until the
first to occur of (i) notice from the us and the Investors that the transactions
contemplated by the Purchase Agreement shall have been terminated in accordance
with their terms, or (ii) March 15, 2005. This Lock-Up Agreement is attached
hereto as Exhibit 99.6.
In addition, we entered into a lock-up agreement with Robert Tarini,
our Chief Executive Officer, and Kenneth Ducey, Jr., our Chief Financial
Officer, dated September 21, 2004 (the "Executive Lock-up Agreement"). Pursuant
to the Executive Lock-up Agreement, Mr. Tarini and Mr. Ducey have agreed not to
sell any securities of the Company until the earlier of (i) notice from us and
the Investors that the transactions contemplated by the Purchase Agreement shall
have been terminated in accordance with their terms or (ii) sixty days after the
effectiveness of the registration statement related to Registration Rights
Agreement. The Executive Lock-up Agreement is attached hereto as Exhibit 99.7.
Finally, certain investors waive their rights of first refusal and
enter into other agreements in accordance with the terms of Waiver Agreement
dated September 21, 2004, and attached hereto as Exhibit 99.8.
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
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99.1 Purchase Agreement dated September 21, 2004, between
Markland Technologies, Inc. and the Investors named
therein.
99.2 Security Agreement dated September 21, 2004, between
Markland Technologies, Inc. and the Investors named
therein.
99.3 Registration Rights Agreement dated September 21,
2004, between Markland Technologies, Inc. and the
Investors named therein.
99.4 Form of Convertible Note
99.5 Form of Warrant
99.6 Lock-up Agreement dated September 21, 2004 between
Markland Technologies, Inc. and James, LLC.
99.7 Lock-up Agreement between Markland Technologies,
Inc., Kenneth P. Ducey and Robert Tarini dated
September 21, 2004.
99.8 Waiver Agreement dated September 21, 2004.
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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.
MARKLAND TECHNOLOGIES, INC.
Date: September 23, 2004
By: /S/ Kenneth P. Ducey, Jr.
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Name: Kenneth P. Ducey, Jr.
Title: President and Chief Financial Officer
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