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) December 10, 2004
GraphOn Corporation
(Exact name of registrant as specified in its charter)
Delaware 0-21683 13-3899021
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3130 Winkle Avenue, Santa Cruz, CA 95065
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (800) 472-7466
N/A
(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 December 10, 2004, GraphOn Corporation (the "Company") entered into a
Reimbursement Agreement with AIGH Investment Partners, LLC ("AIGH"), an
affiliate of a major shareholder of the Company, pursuant to which the Company
has agreed to reimburse AIGH, in the amount of $665,000, plus fees and expenses
relating to the Agreement incurred by AIGH in connection with the payment made
to settle certain litigation against Network Engineering Software, Inc. ("NES")
and certain affiliates of NES. On December 3, 2004, the Company entered into an
Agreement and Plan of Merger and Reorganization relating to, among other things,
the merger of NES with a wholly owned subsidiary of the Company (the "Merger").
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The Company's obligation to reimburse AIGH must be satisfied within five
business days after notice by AIGH, but is subject to several conditions,
including consummation of the Merger and the completion of a related $3.2
million equity financing (the "Financing"). The proposed Financing is subject to
completion of negotiations and definitive agreements and would be conditioned
upon consummation of the Merger. At the Company's option, and at AIGH's option
in certain limited circumstances, the Company may satisfy its reimbursement
obligation by issuing to AIGH equity in the proposed Financing.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-balance Sheet Arrangement of a Registrant.
The information contained in Item 1.01 above is incorporated into this
Item 2.03 by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The information contained in Item 1.01 above is incorporated into this
Item 3.02 by reference.
If the Company issues equity to AIGH in satisfaction of its reimbursement
obligation under the Reimbursement Agreement, the issuance would not be
registered under the Securities Act of 1933, as amended (the "Act"). The Company
expects that it would effect the issuance to AIGH in connection with the
Financing and in reliance upon the exemption from registration contained in
Regulation D, Rule 506 of the Act. The Company will confirm that this exemption
is available at the time of consummation of the Financing. The Company
anticipates that it will be able to rely on this exemption because of the nature
and limited number of potential investors (the "Investors") in the Financing. In
making this determination the Company will rely in part upon representations
made by the Investors.
If the Company issues equity to AIGH in satisfaction of the Company's
reimbursement obligation under the Reimbursement Agreement, the number and type
of securities would be determined based on a formula set forth in the
Reimbursement Agreement. Under the Reimbursement Agreement, the Company would
issue such number of units, consisting of one share of GraphOn's Series A
Preferred Stock and one five-year warrant exercisable to purchase 1/2 share of
GraphOn's Series B Preferred Stock, that is equal to the aggregate amount of the
reimbursement obligation divided by $27.00. It is expected that the Series A
Preferred Stock would automatically convert into shares of the Company's Common
Stock at a conversion rate of $0.27 per share and the Series B Warrants would
automatically convert into warrants to purchase shares of the Company's Common
Stock at a conversion rate of $0.40 per share. These automatic conversions would
be triggered by the Company's filing of an amendment to its currently effective
Certificate of Incorporation to increase the number of shares of the Company's
Common Stock authorized for issuance thereunder. The Company expects that the
Series B Warrants would be exercisable to purchase shares of the Company's
Series B Preferred Stock for an exercise price of $40.00 per share and that each
warrant to purchase a share of Series B Preferred Stock would automatically be
converted (as described above) into a warrant to purchase 100 shares of the
Company's Common Stock with an exercise price of $0.40 per share.
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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.
GRAPHON CORPORATION
(Registrant)
Date: December 15, 2004 By: /s/ William Swain
----------------------------
(Signature)
William Swain
Chief Financial Officer