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 15, 2004
SMARTIRE SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Yukon Territory 0-29248 Not Applicable
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
150-13151 Vanier Place, Richmond, British Columbia, V6V 2J1, Canada
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(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code (604) 276-9554
Copies to:
Darrin M. Ocasio, 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.
NEWBRIDGE DECEMBER 2004 FINANCING
On December 15, 2004, SmarTire Systems, Inc. ("we" or "SmarTire") closed on
a transaction pursuant to which we entered into a Subscription Agreement with
several accredited investors in which the investors agreed to lend a principal
amount of $195,000 to us in exchange for SmarTire's 5% convertible debentures.
We issued the convertible debentures to the investors pursuant to Rule 506 of
Regulation D as promulgated under the Securities Act of 1933, as amended (the
"Act"), and/or Section 4(2) of the Act.
The convertible debentures shall pay 5% per annum simple interest in cash
semi-annually beginning six months from the date of the last closing of the
offering in arrears. They will mature 24 months from the date the investor's
funds were disbursed to SmarTire. The holders may convert, at their sole
discretion at any time, the principal amount of some or all of their convertible
debentures into shares of our common stock, par value $.001, at a conversion
price equal to the lesser of (i) 120% of the closing bid price of the common
stock as reported by Bloomberg, L.P. for the trading day immediately preceding
the date that the holder's funds representing the net amount due to SmarTire
from the purchase price of the offering is transmitted by wire transfer or
otherwise to or for the benefit of SmarTire, or (ii) 80% of the lowest closing
prices for the five (5) trading days preceding the date on which the notice of
conversion is sent via facsimile to SmarTire.
Upon providing 3 business days advance written notice to holders, during which
time they may elect to convert up to all of their convertible debentures, we may
redeem the convertible debentures, in whole or part, at 120% of the face value
of each convertible debenture and the investor shall receive 50,000 redemption
warrants for every $100,000 redeemed (the "Redemption Warrants"). The Redemption
Warrants are exercisable at 120% of the closing bid price on our common stock as
reported by Bloomberg, L.P. for the trading day immediately preceding the
Closing Date. The Redemption Warrants will be exercisable until two (2) years
from the date of issuance.
In addition, pursuant to our Private Placement Memorandum dated as of October
15, 2004 we are obligated to file a registration statement that includes all the
shares of our common stock underlying the convertible debentures. If a
registration statement is not (i) filed within 30 days from our 2004 Annual
Meeting of Shareholders which was held on December 10, 2004 (ii) declared
effective within 120 days of filing or (iii) within 3 business days of receipt
by SmarTire of written or oral communication from the SEC that the registration
statement will not be reviewed or that the SEC has no further comments, or (iv)
the registration stated is filed and effective but thereafter ceases to be
effective (without being effected within 15 business days with a replacement or
amendment thereto), then the holders shall receive an amount equal to 1% for the
first 30 days or part thereof pending such non-registration event and 2% for
each 30 days or part thereof, of the purchase price of the convertible debenture
remaining unconverted and purchase price of shares issued upon conversion of the
convertible debenture owned by such holder.
Newbridge Securities Corporation acted as SmarTire's selling agent and received
a commission equal to 10% of the gross proceeds of the offering together with a
non-accountable expense allowance equal to 3% of the gross proceeds.
CORNELL CAPITAL PARTNERS DECEMBER 2004 FINANCING
In addition, on December 15, 2004 we entered into a Securities Purchase
Agreement with Cornell Capital Partners, L.P., an accredited investor (the
"Investor"), in which the Investor agreed to lend a principal amount of
$2,500,000 to us in exchange for SmarTire's 5% convertible debenture. We issued
the convertible debenture to the Investor pursuant to Rule 506 of Regulation D
as promulgated under the Securities Act of 1933, as amended (the "Act"), and/or
Section 4(2) of the Act.
The convertible debentures shall pay interest at 5% per annum (computed on the
basis of a 365-day year and the actual days elapsed) from the date of this
convertible debenture until paid in full. The convertible debenture will mature
on December 15, 2007. The holders may convert, at their sole discretion at any
time, the principal amount of some or all of their convertible debentures into
shares of our common stock, par value $.001, at a conversion price equal to the
lesser of (i) 120% of the closing bid price of the common stock as reported by
Bloomberg, L.P. as of December 15, 2004, or (ii) 80% of the lowest closing
prices for the five (5) trading days preceding the date on which the notice of
conversion is sent via facsimile to SmarTire.
Upon providing 3 business days advance written notice to holders, during which
time they may elect to convert up to all of their convertible debentures, we may
redeem the convertible debentures, in whole or part, at 120% of the face value
of each convertible debenture and the investor shall receive 50,000 redemption
warrants for every $100,000 redeemed (the "Redemption Warrants"). The Redemption
Warrants are exercisable at 120% of the closing bid price on our common stock as
reported by Bloomberg, L.P. for the trading day immediately preceding the
Closing Date. The Redemption Warrants will be exercisable until two (2) years
from the date of issuance.
In addition, on December 15, 2004 we entered into a Registration Rights
Agreement with the Investor under which we have agreed to file a registration
statement for the purpose of registering 250,000,000 shares of common stock
potentially issuable upon the conversion of principal and interest, or in
payment of interest, under the 5% convertible debentures at the base conversion
price, and at least 200% of the shares of common stock potentially issuable upon
exercise of the warrants at the base exercise price.
If we default on our obligations under the Registration Rights Agreement,
including our agreement to file the registration statement with the Securities
and Exchange Commission no later than 30 days after December 15, 2004 (or to
file a request for acceleration in accordance with Rule 461 under the Securities
Act of 1933 within five trading days of the date that we are notified by the
Securities and Exchange Commission that the registration statement will not be
"reviewed" or will not subject to further review), or if the registration
statement is not declared effective by 90 days after December 15, 2004, we are
required pay to each debenture holder, as liquidated damages and not as a
penalty, for each month that the registration statement has not been filed or
declared effective, as the case may be, either a cash amount or shares of our
common stock within three (3) business days, after demand therefore, equal to 2%
of the liquidated value of the convertible debentures outstanding.
Out of SmarTire's gross proceeds which was received pursuant to this financing,
we paid an aggregate amount of $1,100,462.24 to the Investor in payment of
certain promissory notes previously issued by SmarTire to the Investor.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION.
See Item 1.01 above.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
Our board of directors adopted SmarTire's 2004 Non-US Stock Incentive Plan
effective as of December 17, 2004 (the "Plan") which by its terms will continue
in effect for a term of ten (10) years unless sooner terminated. The maximum
aggregate number of shares of our common stock which may be issued pursuant to
all awards (including options) is 50,000,000. The Plan permits SmarTire to grant
awards to eligible employees who are not residents of the United States and/or
not subject to taxation in the United States, including individuals who are an
officer, a director, an employee or a consultant of SmarTire, although awards
may be granted to other eligible employees.
Awards granted pursuant to the Plan involves or may involve the issuance of: (i)
shares of our common stock, (ii) an option, (iii) a SAR or similar right with a
fixed or variable price related to the fair market value of our common stock and
with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions, or (iv) any other security with the value derived from the
value of our common stock. Such awards include, without limitation, options,
SARs, sales or bonuses of restricted stock, performance units or performance
shares, and an award may consist of one such security or benefit, or 2 or more
of them in any combination or alternative.
Any award granted under the Plan shall be exercisable at such times and under
such conditions as determined by the Plan administrator under the terms of the
Plan and specified in an Award Agreement with the officer, director, employee or
consultant of SmarTire. An award shall be deemed to be exercised when written
notice of such exercise has been given to US in accordance with the terms of the
award by the person entitled to exercise the award and full payment for our
common stock with respect to which the award is received by SmarTire. Shares of
our common stock shall not be issued pursuant to the exercise of an award unless
such exercise and the issuance and delivery of such common stock pursuant
thereto shall comply with all applicable laws, and shall be further subject to
the approval of counsel for SmarTire with respect to such compliance.
We began issuing awards to our eligible employees on December 20, 2004.
In addition, see Item 1.01 above.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL
YEAR
Effective as of December 10, 2004, SmarTire filed a Certificate of Amendment to
its Articles of Incorporation in the Yukon Territory to increase its number of
authorized shares of common stock, par value $.001, from 300,000,000 shares to
an unlimited number of shares. An affirmative vote of a majority of the
outstanding shares of common stock present and voting, in person or by proxy, at
our 2004 Annual Meeting of Shareholders which was held on December 10, 2004,
approved of said amendment. In addition, at the annual meeting, our shareholders
approved an amendment to the articles of incorporation to decrease the number of
minimum directors which are required to serve on the board of directors from 6
to 5.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
Not applicable.
(c) EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
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3.1 Certificate of Amendment to Articles of Incorporation of SmarTire
Systems, Inc.
4.1 Form of Subscription Agreement and Prospective Purchaser
Questionnaire of SmarTire Systems, Inc.
4.2 Form of 5% Convertible Debenture SmarTire Systems, Inc.
4.3 Form of Redemption Warrant of SmarTire Systems, Inc.
4.4 Securities Purchase Agreement dated December 15, 2004 by and between
SmarTire Systems, Inc. and Cornell Capital Partners, L.P.
4.5 Registration Rights Agreement dated December 15, 2004 by and between
SmarTire Systems, Inc. and Cornell Capital Partners, L.P.
4.6 Form of 5% Convertible Debenture SmarTire Systems, Inc.
4.7 Form of Redemption Warrant of SmarTire Systems, Inc.
4.8 2004 Non-US US Stock Incentive Plan of SmarTire Systems, Inc.
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.
SMARTIRE SYSTEMS, INC.
Date: December 21, 2004 /s/ Jeff Finkelstein
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Jeff Finkelstein
Chief Financial Officer