UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 17, 2006
IMAGE INNOVATIONS HOLDINGS INC.
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(Exact name of small Business Issuer as specified in its charter)
NEVADA 0-50119 91-1898414
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
432 Park Avenue South, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (518) 589-9994
N/A
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(Former name or former address, if changes 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 240.14d-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 February 17, 2006, the Registrant entered into a Subscription Agreement with
Cogent Capital Investments Inc. (the "Investor") and Cogent Capital Corp.
("Cogent") pursuant to which the Registrant agreed to issue and sell to the
Investor (i) 1,500,003 shares of common stock of the Registrant ("Common Stock")
and (ii) 263,793 shares of Series A Convertible Preferred Stock of the
Registrant ("Series A Preferred" and collectively with the Common Stock, the
"Shares"). The consideration to be received by the Registrant consists of United
States Treasury Notes and Strips with a market value on the date immediately
preceding the date of delivery of at least $9,000,000 (the "US Securities").
As part of the transaction, on February 17, 2006, the parties entered into the
2002 International Swaps and Derivatives Association, Inc. ("ISDA") Master
Agreement, the ISDA Credit Support Annex, an Equity Swap Transaction
Confirmation and certain other ancillary agreements (collectively, the "ISDA
Agreements"). Pursuant to the ISDA Agreements, the Registrant has agreed to
place the US Securities into escrow as collateral in respect of a swap
transaction governed by the ISDA Agreements (the "Swap") until the earlier of 42
months from the date of the ISDA Agreements or such time as all of the Shares
are registered for resale. In addition, the Company unilaterally can terminate
the ISDA Agreements by exercising a call option for the Common Stock 24 months
after issuance.
The ISDA Agreements provide that commencing 27 months after issuance, and
provided the Company has registered no less than 3,103,450 shares of Common
Stock or such shares are eligible for resale under Rule 144(k), the Company will
have the right, on a quarterly basis, to have one-sixth of the value of the US
Securities released from escrow. To the extent that the closing price of the
Common Stock averaged over the last 10 trading days of each quarterly period
does not equal or exceed $2.90 per share, the Company will be required to
transfer to Cogent an amount equal to one-sixth of the sum represented by
3,103,450 multiplied by $2.90 less the price of the Common Stock averaged over
the last 10 days of each such period. To the extent that the closing price of
the Common Stock averaged over the last 10 trading days of each quarterly period
exceeds $2.90 per share, Cogent will be required to pay to the Company an amount
equal to one-sixth of the sum represented by 3,103,450 multiplied by that
average price less $2.90.
The Company also has the right pursuant to a call option to acquire 3,103,450
shares of its Common Stock from Cogent on the second anniversary of the issuance
date at a price equal to the fair market value thereof at the exercise date. If
this option is not exercised, Cogent would remain collateralized on the Swap by
the US Securities up to $9,000,000. During the period of the escrow, Cogent will
also receive interest on the amount of $9,000,000 at a rate equal to one-month
LIBOR plus 175 basis points (net of interest earned on the escrowed US
Securities), payable monthly. As the escrowed US Securities are released to the
Company, the amount upon which the Company is paying interest reduces by a
commensurate amount.
In addition, on February 17, 2006, as an initial exchange amount in the Swap,
the Registrant paid Cogent $270,000, issued to Cogent 500,000 shares of Common
Stock, and granted a warrant to purchase 400,000 shares of Common Stock at an
exercise price of $5.00 per share (the "Warrant Shares"), subject to adjustment
in certain circumstances. The warrant is exercisable for a period
2
of five (5) years from the date of grant. Furthermore, pursuant to a
registration rights agreement, the Registrant granted piggyback registration
rights to Cogent with respect to 500,000 shares of Common Stock issued pursuant
to the Subscription Agreement together with the 400,000 Warrant Shares.
Each share of Series A Preferred is convertible, upon the earlier of (i) 60 days
after a registration statement registering the Shares is declared effective or
(ii) February 17, 2008, into ten (10) shares of common stock, subject to
adjustment in the event of certain events in respect of the Registrant,
including stock splits, dividends, reclassifications, reorganizations and other
similar events. The Series A Preferred have no voting rights as such and are not
entitled to dividends as a class. The terms of the Series A Preferred provide
that no holder of Series A Preferred shall have the right to receive, and the
Registrant shall not issue, any securities of the Registrant that would cause
such holder to own beneficially, after giving effect to the conversion of any
Series A Preferred held thereby, more than 9.5% of the total outstanding Common
Stock.
Item 3.02. Unregistered Sales of Equity Securities.
On February 17, 2006, the Registrant entered into various agreements pursuant to
which it agreed to issue its unregistered equity securities in accordance with
Section 4(2) of the Securities Act of 1933, as amended, since such sale involves
a transaction by the Registrant not involving a public offering. The details of
this transaction are disclosed in Item 1.01 of this Current Report on Form 8-K.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On February 22, 2006, in connection with the transaction disclosed in Item 1.01
above, the Registrant amended its Certificate of Incorporation by filing a
Certificate of Designation of Series A Convertible Preferred Stock. The
Certificate of Designation provides that each share of Series A Preferred is
convertible, upon the earlier of (i) 60 days after a registration statement
registering the Shares is declared effective or (ii) February 17, 2008, into ten
(10) shares of common stock, subject to adjustment in the event of certain
events in respect of the Registrant, including stock splits, dividends,
reclassifications, reorganizations and other similar events. The Series A
Preferred have no voting rights as such and are not entitled to dividends as a
class. The terms of the Series A Preferred provide that no holder of Series A
Preferred shall have the right to receive, and the Registrant shall not issue,
any securities of the Registrant that would cause such holder to own
beneficially, after giving effect to the conversion of any Series A Preferred
held thereby, more than 9.5% of the total outstanding Common Stock.
The text of the Certificate of Designation is included in this Current Report as
Exhibit 3.1 hereto.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
3.1 Certificate of Designation of Series A Convertible Preferred
Stock of Registrant.
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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.
IMAGE INNOVATIONS HOLDINGS INC.
(Registrant)
Date: March 3, 2006 By: /s/ Michael Preston
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Michael Preston
Chief Executive Officer