UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest reported): January 11, 2005
VERTEX INTERACTIVE, INC.
(Exact name of registrant as specified in charter)
New Jersey 0-15066 22-2050350
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3619 Kennedy Road, South Plainfield, New Jersey 07080
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 756-2000
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.
Securities Purchase Agreement
-----------------------------
On January 11, 2005, we entered into a Securities Purchase Agreement with
AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New
Millennium Capital Partners II, LLC for the sale of (i) $1,850,000 in secured
convertible notes and (ii) warrants to purchase 1,850,000 shares of our common
stock.
The secured convertible notes bear interest at 10%, mature two years from
the date of issuance, and are convertible into our common stock, at the
investors' option, at the lower of:
o $0.09; or
o 40% of the average of the three lowest intraday trading prices for
the common stock on the Over-The-Counter Bulletin Board for the 20
trading days before but not including the conversion date.
The full principal amount of the secured convertible notes, plus a default
interest rate of 15%, is due upon a default under the terms of secured
convertible notes. In addition, we granted the investors a security interest in
substantially all of our assets, including the assets of our wholly owned
subsidiaries, and intellectual property. We are required to file a registration
statement with the Securities and Exchange Commission within 30 days of closing,
which will include the common stock underlying the secured convertible notes and
the warrants. If the registration statement is not declared effective within 60
days from the date of closing, we are required to pay liquidated damages to the
investors. In the event that we breach any representation or warranty in the
Securities Purchase Agreement, we are required to pay liquidated damages in
shares of our common stock or cash, at the election of the investors, in an
amount equal to three percent of the outstanding principal amount of the secured
convertible notes per month plus accrued and unpaid interest.
The warrants are exercisable until five years from the date of issuance at
a purchase price of $0.09 per share. The investors may exercise the warrants on
a cashless basis if the shares of common stock underlying the warrants are not
then registered pursuant to an effective registration statement. In the event
the investors exercise the warrants on a cashless basis, we will not receive any
proceeds. In addition, the exercise price of the warrants will be adjusted in
the event we issue common stock at a price below market, with the exception of
any securities issued as of the date of the warrants or issued in connection
with the secured convertible notes issued pursuant to the Securities Purchase
Agreement.
Upon an issuance of shares of common stock below the market price, the
exercise price of the warrants will be reduced accordingly. The market price is
determined by averaging the last reported sale prices for our shares of common
stock for the five trading days immediately preceding such issuance as set forth
on our principal trading market. The exercise price shall be determined by
multiplying the exercise price in effect immediately prior to the dilutive
issuance by a fraction. The numerator of the fraction is equal to the sum of the
number of shares outstanding immediately prior to the offering plus the quotient
of the amount of consideration received by us in connection with the issuance
divided by the market price in effect immediately prior to the issuance. The
denominator of such issuance shall be equal to the number of shares outstanding
after the dilutive issuance.
The conversion price of the secured convertible notes and the exercise
price of the warrants may be adjusted in certain circumstances such as if we pay
a stock dividend, subdivide or combine outstanding shares of common stock into a
greater or lesser number of shares, or take such other actions as would
otherwise result in dilution of the investors' position.
The investors have agreed to restrict their ability to convert their
secured convertible notes or exercise their warrants and receive shares of our
common stock such that the number of shares of common stock held by them in the
aggregate and their affiliates after such conversion or exercise does not exceed
4.9% of the then issued and outstanding shares of our common stock.
Under a Guaranty and Pledge Agreement, Mr. Nicholas Toms, our Chief
Executive Officer agreed (i) to unconditionally guarantee the timely and full
satisfaction of all obligations, whether matured or unmatured, now or hereafter
existing or created and becoming due and payable to AJW Offshore, Ltd., AJW
Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners
II, LLC, their successors, endorsees, transferees or assigns under the
Securities Purchase Agreement and other transaction documents to the extent of
2,006,418 shares of our common stock owned by Mr. Toms, and (ii) to grant to AJW
Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New
Millennium Capital Partners II, LLC, their successors, endorsees, transferees or
assigns a security interest in the 2,006,418 shares owned by Mr. Toms as
collateral security for such obligations.
Stock Purchase Agreement
------------------------
On January 12, 2005, we entered into a Stock Purchase Agreement with Peter
B. Ayling, Elizabeth M. Ayling, Brad L. Leonard, Michael C. Moore, Cape Systems
and Consulting Services Ltd. and Cape Systems, Inc. pursuant to which we
purchased all of the issued and outstanding shares of common stock of Cape
Systems and Consulting Services Ltd. from Peter B. Ayling and Elizabeth M.
Ayling and Cape Systems, Inc. from Brad L. Leonard and Michael C. Moore for an
aggregate purchase price of $2,000,000. Pursuant to the Stock Purchase
Agreement, the parties executed an Escrow Agreement pursuant to which $200,000
of the purchase price was placed in escrow for a period of 15 months as a fund
for indemnity claims arising out of the transaction.
Cape Systems is a provider of palletizing and packaging configuration, and
truck/container loading software that improves pallet and truck utilization, and
reduces packaging, storage and transportation costs. Its programs optimize
pallet patterns, create new case sizes and product packaging, create efficient
bundles of corrugated flat packs, build display pallet loads and test the
strength of corrugated board. Its customer base, numbering approximately 3,700,
includes, among others, such companies as Wal-Mart, Sam's Club, Kraft, Nestle,
Procter & Gamble, Smurfit-Stone and Coca-Cola.
In connection with the acquisition, we entered into an Employment
Agreement with Brad L. Leonard to serve as Vice President General Manager -
Sales, Cape Group. Pursuant to the Employment Agreement, Mr. Leonard will
receive an annual salary of $110,000, 200,000 stock options were granted upon
execution and Mr. Leonard will receive 160,000 stock options each year employed,
commencing January 12, 2006, for a period of five years. The Employment
Agreement can be terminated by the Company upon 30 days written notice to Mr.
Leonard and by Mr. Leonard upon written notice to the Company for just cause, as
defined therein.
In connection with the acquisition, we entered into a Consulting Agreement
with IMC Development Group, which is owned by Peter and Elizabeth Ayling.
Pursuant to the Consulting Agreement, we retained IMC Development Group for a
period of 18 months, which is then automatically renewable on a month-to-month
basis. IMC Development Group will be paid 7,500 pounds per month (approximately
$14,021 per month based on current exchange rates), 300,000 stock options were
granted upon execution and IMC Development Group will receive 500,000 stock
options each year while the Consulting Agreement is in place, commencing January
12, 2006, for a period of three years. Additionally, Mr. Ayling will serve as
our Vice President of Marketing.
Item 2.01 Acquisition of Assets.
See Item 1.01 above.
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 above.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of business acquired.
1. Audited Financial Statements of Cape Systems and Consulting
Services Ltd. for the year ended December 31, 2004 (to be
filed by amendment).
2. Audited Financial Statements of Cape Systems, Inc. for the
year ended December 31, 2004 (to be filed by amendment).
(b) Pro forma financial information.
Pro forma Financial Information will be filed by amendment.
(c) Exhibits.
Exhibit
Number Description
- --------------------------------------------------------------------------------
4.1 Securities Purchase Agreement, dated January 11, 2005, by and among
Vertex Interactive, Inc., AJW Offshore, Ltd., AJW Qualified
Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners
II, LLC.
4.2 Callable Secured Convertible Note issued to AJW Offshore, Ltd.,
dated January 11, 2005.
4.3 Callable Secured Convertible Note issued to AJW Qualified Partners,
LLC, dated January 11, 2005.
4.4 Callable Secured Convertible Note issued to AJW Partners, LLC, dated
January 11, 2005.
4.5 Callable Secured Convertible Note issued to New Millennium Capital
Partners II, LLC, dated January 11, 2005.
4.6 Stock Purchase Warrant issued to AJW Offshore, Ltd., dated January
11, 2005.
4.7 Stock Purchase Warrant issued to AJW Qualified Partners, LLC, dated
January 11, 2005.
4.8 Stock Purchase Warrant issued to AJW Partners, LLC, dated January
11, 2005.
4.9 Stock Purchase Warrant issued to New Millennium Capital Partners II,
LLC, dated January 11, 2005.
4.10 Registration Rights Agreement, dated as of January 11, 2005, by and
among Vertex Interactive, Inc., AJW Offshore, Ltd., AJW Qualified
Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners
II, LLC.
4.11 Security Agreement, dated as of January 11, 2005, by and among
Vertex Interactive, Inc., Data Control Systems, Inc., Renaissance
Software, Inc., Xequte Solutions PLC, Xequte Solutions, Inc., Vertex
Interactive (UK), Ltd., Vertex Interactive (Ireland) Ltd., Vertex
Interactive (Mfg) Ltd., Trend Investments Ltd., ICS France
Indentcode-System S.A.., Vertex Support And Maintenance Italia SRL,
Vertex Interactive Italia SRL, Euronet Consulting SRL, AJW Offshore,
Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New
Millennium Capital Partners II, LLC.
4.12 Intellectual Property Security Agreement, dated January 11, 2005, by
and among Vertex Interactive, Inc., Data Control Systems, Inc.,
Renaissance Software, Inc., Xequte Solutions PLC, Xequte Solutions,
Inc., Vertex Interactive (UK), Ltd., Vertex Interactive (Ireland)
Ltd., Vertex Interactive (Mfg) Ltd., Trend Investments Ltd., ICS
France Indentcode-System S.A.., Vertex Support And Maintenance
Italia SRL, Vertex Interactive Italia SRL, Euronet Consulting SRL,
AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC
and New Millennium Capital Partners II, LLC.
4.13 Guaranty and Pledge Agreement, dated January 11, 2005, by and among
Vertex Interactive, Inc., Nicholas Toms, AJW Offshore, Ltd., AJW
Qualified Partners, LLC, AJW Partners, LLC and New Millennium
Capital Partners II, LLC.
10.1 Stock Purchase Agreement, dated January 12, 2005, by and among
Vertex Interactive, Inc., Peter B. Ayling, Elizabeth M. Ayling, Brad
L. Leonard, Michael C. Moore, Cape Systems and Consulting Services
Ltd. and Cape Systems, Inc.
10.2 Escrow Agreement, dated as of January 12, 2005, by and among Vertex
Interactive, Inc., Peter B. Ayling, Elizabeth M. Ayling, Brad L.
Leonard, Michael C. Moore and Law Office of Jeffrey D. Marks P.C.
10.3 Employment Agreement, dated as of January 12, 2005, by and between
Vertex Interactive, Inc. and Brad L. Leonard
10.4 Consulting Agreement, dated as of January 12, 2005, by and between
Vertex Interactive, Inc. andIMC Development Group
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.
Vertex Interactive, Inc.
Date: January 18, 2005 /s/ NICHOLAS R. TOMS
---------------------------
Nicholas R. Toms, Chief Executive Officer