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): March 23, 2005
SmarTire Systems, Inc.
(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.
On March 23, 2005, we closed on a transaction pursuant to which we entered into
an Investment Agreement dated as of March 22, 2005 with one accredited investor
in which we sold an aggregate of $4,000,000 of our Series A 5% Convertible
Preferred Stock, no par value per share (the "Preferred Stock"). The purchase
price was $4,000,000, of which $2,850,000 was previously funded pursuant to
certain transaction documents we previously entered into with the investor.
These transaction documents were terminated by the parties on March 23, 2005
(see Item 1.02 below). On March 23, 2005, we received net proceeds of
$1,015,000, after deducting the $2,850,000 which was previously funded, a
$115,000 commitment fee and legal fees in the amount of $20,000. We issued the
Preferred Stock 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.
We issued 25,000 shares of Preferred Stock to the investor. Each share of
Preferred Stock has a stated value of $160 and shall be convertible at any time
after the date of issuance into such number of fully paid and non-assessable
shares of our common stock, no par value per share, equal to the quotient of
$160 divided by $0.01 per share. The conversion price is adjustable in the event
of any stock split or reverse stock split, stock dividend, reclassification of
common stock, recapitalization, merger or consolidation. In addition, the
conversion price of the Preferred Stock will be adjusted in the event that we
spin off or otherwise divest ourselves of a material part of our business or
operations or dispose all or a portion of our assets.
The holder of the Preferred Stock shall be entitled to receive dividends or
distributions on a pro rata basis according to its holdings of shares of the
Preferred Stock when and if declared by us in the amount of 5.0% per year.
Dividends shall be paid in cash and are cumulative. No cash dividends or
distributions shall be declared or paid or set apart for payment on our common
stock in any calendar year unless cash dividends or distributions on the
Preferred Stock for such calendar year are likewise declared and paid or set
apart for payment. No declared and unpaid dividends shall bear or accrue
interest. Upon our liquidation, dissolution, or winding up, whether voluntary or
involuntary, before any distribution or payment shall be made to any of the
holders of our common stock or any series of preferred stock, the holder of the
Preferred Stock shall be entitled to receive out of our assets, an amount equal
to $160 per share of the Preferred Stock plus all declared and unpaid dividends
thereon, for each share of the Preferred Stock held by such holder.
We may redeem up to 80% of the Preferred Stock by paying to the holder cash
equal to 120% of the liquidation preference, which is defined as $160 per share
of the Preferred Stock plus all declared and unpaid dividends thereon, for each
share of the Preferred Stock held by such holder on the redemption payment date.
In addition, on March 22, 2005 we entered into a Registration Rights Agreement
with the investor under which we have agreed to file a registration statement
within 30 days after the closing date for the purpose of registering 400,000,000
shares of common stock issuable upon the conversion of the Preferred Stock. In
addition, we are obligated to use our best efforts to cause such registration
statement to be declared effective by the Securities and Exchange Commission no
later than 120 days after the filing thereof and to insure that the registration
statement remains in effect until all of the shares of common stock issuable
upon conversion of the Preferred Stock have been sold.
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 March 22, 2005, or if the
registration statement is not declared effective within 120 days after March 22,
2005, we are required pay to the investor, as liquidated damages and not as a
penalty, for each month or any part thereof 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 equal to 2% of the liquidation amount, which is
defined in the Certificate of Designation of Series A Convertible Preferred
Stock as an amount equal to $160 per share plus all declared and unpaid
dividends thereon.
Item 1.02 Termination of a Material Definitive Agreement
On March 22, 2005 we entered into a Termination Agreement with the investor
pursuant to which the parties agreed to terminate (i) a Securities Purchase
Agreement; (ii) a 5% convertible debenture in the amount of $2,500,000; (iii) a
Security Agreement; (iv) an Investor Registration Rights Agreement; (v) an
Escrow Agreement; and (vi) Irrevocable Transfer Agent Instructions, all of which
are dated December 15, 2004; as well as (vii) a promissory note in the amount of
$350,000 dated February 9, 2005.
Item 3.02 Unregistered Sales of Equity Securities.
See Item 1.01 above.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year
Pursuant to the laws of the Yukon Territory, on March 18, 2005 we filed articles
of amendment to our articles of incorporation which set forth all the rights and
preferences of the Preferred Stock, the materials terms of which are described
in Item 1.01 above.
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 Articles of Amendment to the Articles of Incorporation of SmarTire
Systems, Inc. with respect to the Series A Convertible Preferred
Stock
4.1 Investment Agreement dated as of March 22, 2005 by and between
SmarTire Systems, Inc. and Cornell Capital Partners, L.P.
4.2 Registration Rights Agreement dated as of March 22, 2005 by and
between SmarTire Systems, Inc. and Cornell Capital Partners, L.P.
4.3 Termination Agreement dated as of March 22, 2005 by and between
SmarTire Systems, Inc. and Cornell Capital Partners, L.P.
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: March 29, 2005 /s/ Robert Rudman
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Robert Rudman
Chief Executive Officer