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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): September 26, 2006
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ARKADOS GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-27587 22-3586087
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(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
220 Old New Brunswick Road, Suite 202
Piscataway, NJ 08854
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(Address of Principal Executive Offices)
(732) 465-9300
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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:
[ ] 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 240.24d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.23e-4(c))I
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ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On September 26, 2006, we entered into an Additional Issuance Agreement
with Bushido Capital Master Fund, LP ("Bushido), Pierce Diversified Strategy
Master Fund LLC - Series BUS ("Pierce"), Andreas Typaldos (our Chairman and a
principal stockholder) and the Andreas Typaldos Family Limited Partnership (a
New York limited partnership for which Renee Typaldos, our Chairman's wife, acts
as managing partner). Pursuant to the Additional Issuance Agreement, we sold an
additional $500,000 principal amount of our 6% secured convertible debentures
due December 28, 2008 to Pierce and Bushido. The debentures have a term of three
years and mature on December 28, 2008. The debentures pay interest at the rate
of 6% per annum, payable semi-annually on January 1 and July 1 of each year
beginning July 1, 2007. These debentures on substantially the same terms as, and
rank pari passu to, an aggregate of $5,649,355.21 of 6% debentures (the "Prior
Debentures") we sold to Bushido, Gamma Opportunity Capital Partners, LP (Classes
A and C, collectively "Gamma"), Pierce, Cargo Holdings LLC, a New York limited
liability company owned by Renee Typaldos and Gennaro Vendome, one of our
directors, Mr. Typaldos and Mr. Typaldos' Family Limited Partnership during the
period from December 28, 2005 to June 30, 2006.
The debentures are convertible at any time at the option of the holder into
shares of our common stock at a price of $0.85 per share, subject to adjustment
as set forth therein. The debenture and warrants described below must be
redeemed by us at a premium if we agree to sell all of the Company's assets to a
third party for cash and cash equivalents.
Pursuant to the Additional Issuance Agreement, Bushido and Pierce each
received warrants to purchase an additional 117,674 shares of our common stock.
The warrants have an exercise price, subject to certain adjustments, of $1.00
per share and are exercisable at any time on or prior to December 28, 2010. The
warrants do not grant the holders thereof any voting or other rights of our
stockholders. The Additional Issuance Agreement is filed with this report as
Exhibit 99.1, the form of 6% secured convertible debenture and the form of
common stock purchase warrant are incorporated into this report by reference to
previous filings.
We also issued to Bushido and Pierce additional potentially short term
warrants to purchase up to an aggregate of 117,674 shares of our common stock.
The warrants have an exercise price, subject to certain adjustments, of $0.85
per share and are exercisable at any time prior to the earlier of December 28,
2010 and twelve months after the effective date of the registration statement we
file with the SEC to register the shares of common stock issuable upon
conversion of the debentures and exercise of the warrants. The form of short
term common stock purchase warrant is incorporated into this report by reference
to a previous filing.
Upon the occurrence of certain events of default defined in the debentures,
including events of default under the transaction documents related to the
financing, the full principal amount of the debentures, together with interest
and other amounts owing, become immediately due and payable. In connection with
the issuance of the 6% debentures, we entered into a security agreement granting
Bushido Capital Master Fund, LP, Pierce Diversified Strategy Master Fund LLC -
Series BUS, Andreas Typaldos and the Andreas Typaldos Family Limited Partnership
a security interest in our assets to secure our obligations under the
debentures.
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Pursuant to an Intercreditor and Waiver Agreement entered into August 18, 2006
and effective as of June 30, 2006 among all of the holders of our 6% secured
convertible debentures, the holders share the security interest pari passu and
in proportion to the outstanding principal amounts held by them. Obligations
under the debentures are guaranteed by Arkados, Inc., our wholly-owned
subsidiary.
In connection with the Additional Issuance Agreement and other
developments, we entered into an Amendment and Waiver Agreement dated September
26, 2006 with the holders of our 6% convertible debentures principally to permit
the issuance of 300,000 options to a consultant to the Company and temporarily
waive the prospective technical default caused by our failure to timely file our
Form 10-KSB Report for the year ended May 31, 2006.
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
The disclosure provided in Item 1.01 of this Form 8-K is hereby
incorporated by reference into this Item 2.03 with respect to the terms and sale
of, and the financial obligations created by, the 6% secured convertible
debentures.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.
The disclosure provided in Item 1.01 of this Form 8-K is hereby
incorporated by reference into this Item 3.02 with respect to the terms and sale
of the 6% secured convertible debentures and the warrants. Each of the
purchasers represented that they were accredited investors and we did not engage
a broker or make any general solicitation in connection with the sale of the
securities. The sale of the debentures and issuance of the warrants were made
pursuant to Section 4(2) of the Securities Act of 1933, as amended. The closing
of the sale of the debentures and issuance of the warrants occurred on September
26, 2006. We had received $500,000 of the purchase price of the debentures prior
to the closing date as an advance from one of the purchasers.
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ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Incorporated by Reference
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Exhibit File Filing Filed
Number Form Number Exhibit Date Herewith
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4.1 Form of 6% Secured Convertible Debenture due Form 8-K/A 0-27587 4.1 7/11/06
December 28, 2008
4.2 Form of Common Stock Purchase Warrant (long term Form 8-K/A 0-27587 4.2 7/11/06
and short term warrants differ as to price and
expiration date as set forth in footnotes to the
form filed)
4.3 Registration Rights Agreement, dated as of June Form 8-K/A 0-27587 4.3 7/11/06
30, 2006, by and among the Registrant, Bushido
Capital Master Fund, LP, Pierce Diversified
Strategy Master Fund LLC - Series BUS, Andreas
Typaldos and the Andreas Typaldos Family Limited
Partnership
99.1 Securities Purchase Agreement, dated as of June Form 8-K/A 0-27587 99.1 7/11/06
30, 2006, by and among the Registrant, Bushido
Capital Master Fund, LP, Pierce Diversified
Strategy Master Fund LLC - Series BUS, Andreas
Typaldos and the Andreas Typaldos Family Limited
Partnership
99.2 Security Agreement, dated as of June 30, 2006, by Form 8-K/A 0-27587 99.2 7/11/06
and among the Registrant, Bushido Capital Master
Fund, LP, Pierce Diversified Strategy Master Fund
LLC - Series BUS, Andreas Typaldos and the Andreas
Typaldos Family Limited Partnership
99.3 Subsidiary Guarantee dated as of June 30, 2006 Form 8-K/A 0-27587 99.3 7/11/06
executed by Arkados, Inc.
99.4 Amendment Agreement dated August 18, 2006 between Form 8-K 0-27587 99.1 8/24/06
CDKnet.com, Inc., Bushido Capital Master Fund, LP,
Gamma Opportunity Capital Partners, LP (Classes A
and C), and Cargo Holdings LLC
99.5 Additional Issuance Agreement dated September 26, *
2006 between Arkados Group, Inc., Bushido Capital
Master Fund, LP, Pierce Diversified Strategy
Master Fund, LLC - Series BUS, Andreas Typaldos
and Andreas Typaldos Family Limited Partnership
99.6 Waiver and Amendment Agreement dated September 26, *
2006 between Arkados Group, Inc. and Bushido
Capital Master Fund, L.P., Gamma Opportunities
Capital Partners, LP Class A, Gamma Opportunities
Capital Partners, LP Class C and Cargo Holdings
LLC
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SIGNATURE
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.
ARKADOS GROUP, INC.
Date: September 29, 2006 By: /s/ Oleg Logvinov
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Oleg Logvinov
Chief Executive Officer
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