FILED PURSUANT TO RULE 424(b)3 AND RULE 424(c)
REGISTRATION NO. 333-123864
HALO TECHNOLOGY HOLDINGS, INC.
PROSPECTUS SUPPLEMENT DATED APRIL 12, 2006
TO THE PROSPECTUS DATED MARCH 29, 2006
On March 31, 2006 and April 3, 2006, we filed with the Securities and
Exchange Commission the attached Current Reports on Form 8-K. The attached
information supplements and supersedes, in part, the information in the
prospectus.
In addition, this supplement replaces the Liquidity and Capital Resources
and Recent Developments sections of the prospectus, contained on pages 27
through 32, with Liquidity and Capital Resources and Recent Developments
sections contained on pages 2 through 10 of this supplement.
This prospectus supplement should be read in conjunction with the
prospectus, which is required to be delivered with this prospectus supplement.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 3 OF THE PROSPECTUS IN
DETERMINING WHETHER TO PURCHASE THE COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS SUPPLEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTIVE INVESTORS SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN
THIS SUPPLEMENT, THE PROSPECTUS OR INFORMATION SPECIFICALLY INCORPORATED BY
REFERENCE IN THE PROSPECTUS OR THIS SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE PROSPECTIVE INVESTORS WITH INFORMATION THAT IS DIFFERENT.
The date of this prospectus supplement is April 12, 2006
LIQUIDITY AND CAPITAL RESOURCES
Halo has three primary cash needs. These are (1) operations, (2)
acquisitions and (3) debt service and repayment. Halo has financed a significant
component of its cash needs through the sale of equity securities and debt.
For the six months ended December 31, 2005 and December 31, 2004, Halo
used approximately $265,000 and $1,297,000, respectively to fund its operations.
The cash was used primarily to fund operating losses, as well as approximately
$16,374,000 for acquisitions, $8,325,000 for repayment of the principle portion
of outstanding debt. For the years ended June 30, 2005 and 2004 Halo used
approximately $3.4 and $4.8 million, respectively to fund its operations.
As of June 30, 2005 Halo used approximately $15.8 million for investing
activities. Halo paid approximately $15 million in cash for the acquisition of
Gupta and deposited approximately $.8 million for the Kenosia acquisition.
As of June 30, 2005 Halo raised approximately $20.8 million, of which
$12.2 million was from the sale of preferred stock, $2.5 million from issuance
of subordinated notes and $6.1 million from the issuance of senior notes.
On January 31, 2005, Halo issued $2,500,000 principal amount of
subordinated convertible promissory notes (the "Subordinated Notes"). The
Subordinated Notes bear interest at 10%, payable in common stock or cash, and
mature January 31, 2007. The Subordinated Notes are convertible at any time into
shares of Halo common stock at $1.00 per share, which conversion rate is subject
to certain anti-dilution adjustments. The common stock issuable upon conversion
of the Subordinated Notes has certain registration rights.
Halo entered into a $50,000,000 credit facility with Fortress Credit
Opportunities I LP and Fortress Credit Corp. on August 2, 2005 (the " Credit
Agreement"). Subject to the terms and conditions of the Credit Agreement, the
lenders thereunder (the "Lenders") agreed to make available to Halo a term loan
facility in three Tranches, Tranches A, B and C, in an aggregate amount equal to
$50,000,000 (the "Loan"). In connection with entering into the Credit Agreement,
Halo borrowed $10,000,000 under Tranche A to repay its then-existing senior
indebtedness, as well as certain existing subordinated indebtedness and to pay
certain closing costs. On October 26, 2005, in connection with the closings of
the acquisition of Tesseract, DAVID Corporation, Process Software, ProfitKey
International and Foresight Software, Inc., Halo entered into Amendment
Agreement No. 1 ("Amendment Agreement") to the Credit Agreement under which the
Lenders made an additional loan of $15,000,000 under Tranche B of the credit
facility under the Credit Agreement. The rate of interest payable on the amounts
borrowed under the Loan is a floating percentage rate per annum equal to the sum
of the "LIBOR" for that period plus the "Margin". For theses purposes, LIBOR
means the rate offered in the London interbank market for U.S. Dollar deposits
for the relevant period but no less than 2.65%. For these purposes, "Margin"
means 9% per annum. Interest is due and payable monthly in arrears.
The Credit Agreement contains certain financial covenants usual and
customary for facilities and transactions of this type. In the event Halo
completes further acquisitions, Halo and the other parties to the credit
agreement will agree upon modifications to the financial covenants to reflect
the changes to Halo's consolidated assets, liabilities, and expected results of
operations in amounts to be mutually agreed to by the parties. In addition, the
Credit Agreement provides that in
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the event of certain changes of control, including (i) a reduction in the equity
ownership in Halo of Ron Bienvenu or his immediate family members below 90% of
such equity interests on the date of the Credit Agreement, or (ii) Ron Bienvenu
ceases to perform his current management functions and is not replaced within 90
days by a person satisfactory to Fortress, all amounts due may be declared
immediately due and payable.
The Credit Agreement contains specific events of default, including
failure to make a payment, the breach of certain representations and warranties,
and insolvency events. There is also a "cross-default" provision that provides
that certain events of default under certain contracts between Halo or its
subsidiaries and third parties will constitute an event of default under the
Credit Agreement.
Halo's obligations under the Credit Agreement are guaranteed by the direct
and indirect subsidiaries of Halo, and any new subsidiaries of Halo are
obligated to become guarantors. Halo and its subsidiaries granted first priority
security interests in their assets, and pledged the stock or equity interests in
their respective subsidiaries, as collateral for the Loans. In addition, Halo
has undertaken to complete certain matters, including the delivery of stock
certificates in subsidiaries, and the completion of financing statements
perfecting the security interests granted under the applicable state or foreign
jurisdictions concerning the security interests and rights granted to the
Lenders. Any new subsidiary of Halo will become subject to the same provisions.
On September 20, 2005, Halo issued a $500,000 principal amount promissory
note (the "September 2005 Note"). The maturity on this note was December 19,
2005, unless it was converted prior to that date into equity. On January 11,
2006, the holder of this note converted the $500,000 principal (plus accrued
interest) into the Series E Subscription Agreement described under " -- Recent
Developments; Series E Notes and Series E Subscription Agreements" below. Under
the Series E Subscription Agreement, the holder of the September 2005 note had
the right, in the event that Halo completed or entered into agreements to sell
equity securities on or before February 15, 2006, to convert the securities
received under the Series E Subscription Agreement into such other equity
securities as if the investor had invested the amount invested in such
securities. The holder of the September 2005 Note has indicated to Halo that it
intends to exercise this right and receive the same securities as were issued
under the January 2006 Subscription Agreements. The terms of the January 2006
Subscription Agreements are described more fully below under " -- Recent
Developments; January 2006 Subscription Agreements."
On October 26, 2005, as part of the acquisition of Tesseract, Halo issued
a promissory note in the amount of $1,750,000 to Platinum (the "Platinum Note").
The principal under the Platinum Note accrues interest at a rate of 9.0% per
annum. The principal and accrued interest under the Platinum Note was due on
March 31, 2006. Interest is payable in registered shares of common stock of
Halo, provided that until such shares are registered, interest shall be paid in
cash. The Platinum Note contains certain negative covenants including that Halo
will not incur additional indebtedness, other than permitted indebtedness under
the Platinum Note. Under the Platinum Note, the following constitute an event of
default: (a) Halo shall fail to pay the principal and interest when due and
payable: (b) Halo fails to pay any other amount under the Platinum Note when due
and payable: (c) any representation or warranty of Halo was untrue or misleading
in any material respect when made; (d) there shall have occurred an acceleration
of the state maturity of any indebtedness
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for borrowed money of Halo or any Halo subsidiary of $50,000 or more in
aggregate principal amount; (e) Halo shall sell, transfer, lease or otherwise
dispose of all or any substantial portion of its assets in one transaction or a
series of related transactions, participate in any share exchange, consummate
any recapitalization, reclassification, reorganization or other business
combination transaction or adopt a plan of liquidation or dissolution or agree
to do any of the foregoing; (f) one or more judgments in an aggregate amount in
excess of $50,000 shall have been rendered against Halo or any Halo subsidiary;
(g) Halo breaches certain of its covenants set forth in the Platinum Note; or
(h) an Insolvency Event (as defined in the Platinum Note) occurs with respect to
Halo or a Halo subsidiary. Upon such an event of default, the holder may, at its
option, declare all amounts owed under the Platinum Note to be due and payable.
On October 21, 2005, Halo entered into certain convertible promissory
notes to various accredited investors (the "October 2005 Notes") in the
aggregate principal amount of One Million Dollars ($1,000,000). Interest accrues
under the October 2005 Notes at the rate of ten percent (10%) per annum. The
principal amount of the October 2005 Notes, together with accrued interest, was
due February 19, 2006, or 90 days after the date it was entered into, unless the
October 2005 Notes were converted into debt or equity securities of Halo in
Halo's next financing involving sales by Halo of a class of its preferred stock
or convertible debt securities, or any other similar or equivalent financing
transaction. Five hundred thousand dollars ($500,000) in principal amount (plus
accrued interest) of the October 2005 Notes was repaid by Halo in early March.
On January 11, 2006, the holder of the remaining $500,000 October 2005 Note
converted the $500,000 principal (plus accrued interest) under this October 2005
Note into the Series E Subscription Agreement described under " -- Recent
Developments; Series E Notes and Series E Subscription Agreements" below. Under
the Series E Subscription Agreement, the holder of this October 2005 Note had
the right, in the event that Halo completed or entered into agreements to sell
equity securities on or before February 15, 2006, to convert the securities
received under the Series E Subscription Agreement into such other equity
securities as if the investor had invested the amount invested in such
securities. The holder of the October 2005 Note has indicated to Halo that it
intends to exercise this right and receive the same securities as were issued
under the January 2006 Subscription Agreements. The terms of the January 2006
Subscription Agreements are described more fully below under " -- Recent
Developments; January 2006 Subscription Agreements."
Also on October 21, 2005, Halo issued warrants (the "October 2005
Warrants") to purchase an aggregate of 363,636 shares of common stock, par value
$0.00001 per share of Halo. The October 2005 Warrants were issued in connection
with the October 2005 Notes described above. The exercise price for the October
2005 Warrants is $1.375, subject to adjustment as provided in the October 2005
Warrants. The October 2005 Warrants are exercisable until October 21, 2010. The
October 2005 Warrants contain an automatic exercise provision in the event that
the warrant has not been exercised but the Fair Market Value of the Warrant
Shares (as defined in the October 2005 Warrants) is greater than the exercise
price per share on the expiration date. The October 2005 Warrants also contain a
cashless exercise provision. The October 2005 Warrants also contain a limitation
on exercise which limits the number of shares of Halo common stock that may be
acquired by the holder on exercise to that number of shares as will insure that,
following such exercise, the total number of shares of common stock then
beneficially owned by such holder and its affiliates will not
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exceed 9.99% of the total number of issued and outstanding shares of Halo common
stock. This provision is waivable by the holder on 60 days notice.
On October 14, 2005, one of Halo's directors, David Howitt, made a
short-term loan to Halo for $150,000. On January 11, 2006, Mr. Howitt converted
the principal (plus accrued interest) under this loan into the Series E
Subscription Agreement described under " -- Recent Developments; Series E Notes
and Series E Subscription Agreements" below. Under the Series E Subscription
Agreement, Mr. Howitt has the right, in the event that Halo completed or entered
into agreements to sell equity securities on or before February 15, 2006, to
convert the securities received under the Series E Subscription Agreement into
such other equity securities as if he had invested the amount invested in such
securities. Mr. Howitt has indicated to Halo that he intends to exercise this
right and receive the same securities as were issued under the January 2006
Subscription Agreements. The terms of the January 2006 Subscription Agreements
are described more fully below under " -- Recent Developments; January 2006
Subscription Agreements."
As of December 31, 2005 Halo had approximately $1,844,000 in cash and cash
equivalents, $4,550,000 in net accounts receivable, $8,658,000 in accounts
payable and accrued expenses, and $4,842,000 in short-term notes and loans
payable, net of warrants' fair value discount of $108,000 and $1,293,000 to ISIS
and affiliated companies.
For the six months ended December 31, 2005, Halo used approximately
$16,425,928 for investing activities. During the same period, Halo paid
approximately $507,000 in cash as part of consideration to acquire Kenosia and
approximately $15,867,102 in cash as part of consideration to purchase
Tesseract, Process, DAVID Corporation, Profitkey, and Foresight from Platinum
Equity, LLC.
As of December 31, 2005, Halo had debt that matures in the next 12 months
in the amount of $4,950,000. This consists of $500,000 of note payable to
Bristol Technology, Inc. (seller of Kenosia), $2,750,000 payable to Platinum
Equity, LLC (seller of Tesseract, Process, DAVID Corporation, Profitkey, and
Foresight), and $1,700,000 in notes payable to other investors. As of the date
hereof, $500,000 of the $1,700,000 notes have been paid, and the $500,000 note
payable to Bristol Technology, Inc has been paid. Halo has also taken additional
debt in the amount of $700,000 and $1,375,000 in January 2006, both of which are
expected to be paid in equity securities.
Halo continues to evaluate strategic alternatives, including opportunities
to strategically grow the business, enter into strategic relationships, make
acquisitions or enter into business combinations. Halo can provide no assurance
that any such strategic alternatives will come to fruition and may elect to
terminate such evaluations at any time.
Halo's future capital requirements will depend on many factors, including
cash flow from operations, continued progress in research and development
programs, competing technological and market developments, and Halo's ability to
maintain its current customers and successfully market its products, as well as
any future acquisitions it undertakes. Halo intends to meet its cash needs, as
in the past, through cash generated from operations, the proceeds of privately
placed equity issuances and debt. Even without further acquisitions, in order to
meet its financial obligations including repayment of outstanding debt
obligations, Halo will have to issue further equity and engage in further debt
transactions. There can be no guarantee that Halo will be successful in such
efforts. In the absence of such further financing, Halo will
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either be unable to meet its debt obligations or with have to significantly
restructure its operations, or a combination of these two actions. Such actions
would significantly negatively affect the value of Halo's common stock.
RECENT DEVELOPMENTS
Options Granted to Mark Finkel
In connection with his employment by Halo, and under the Halo Technology
Holdings 2005 Equity Incentive Plan, on January 4, 2006, Mr. Finkel received
stock options for 600,000 shares of Halo's common stock. The exercise price for
Mr. Finkel's options is $1.22 per share (the Fair Market Value on the date of
grant by the Compensation Committee). The options granted to Mr. Finkel have a
ten year term. 25% of these options vest on the first anniversary of the award,
provided Mr. Finkel remains in his position through that date, and the remaining
options vest ratably over the following 36 months, provided that Mr. Finkel
remains with Halo.
Series E Notes and Series E Subscription Agreements
On January 11, 2006, Halo entered into certain convertible promissory
notes (the "Series E Notes") in the aggregate principal amount of Seven Hundred
Thousand Dollars ($700,000). Interest accrues under the Series E Notes at the
rate of ten percent (10%) per annum. The Notes provide that they automatically
convert into (i) such number of fully paid and non-assessable shares of Halo's
Series E Preferred Stock (the "Series E Stock") equal to the aggregate
outstanding principal amount due under the Series E Notes plus the amount of all
accrued but unpaid interest under the Series E Notes divided by $1.25, and (ii)
warrants (the "Series E Warrants") to purchase a number of shares of Halo's
common stock equal to 40% of such number of shares of Series E Stock issued to
the holder. Under the terms of the Series E Notes, the automatic conversion was
to occur upon the effectiveness of the filing of the Certificate of
Designations, Preferences and Rights (the "Certificate of Designations")
pertaining to Halo's Series E Stock, and, in the event that the Certificate of
Designations was not filed 30 days after the Series E Notes were issued
(February 10, 2006) then the holders of the Series E Notes may demand that Halo
pay the principal amount of the Series E Notes, together with accrued interest.
No demand for payment has been made.
Under the Series E Subscription Agreements described below, holders of the
Series E Notes had the right, in the event that Halo completed or entered into
agreements to sell equity securities on or before February 15, 2006, to convert
the Series E Notes into such other equity securities as if the investor had
invested the amount invested in such securities. The holders of the Series E
Notes have indicated to Halo that they intend to exercise this right and receive
the same securities as were issued under the January 2006 Subscription
Agreements. The terms of the January 2006 Subscription Agreements are described
more fully below under "Recent Developments -- January 2006 Subscription
Agreements."
Also on January 11, 2006, Halo entered into certain Subscription
Agreements (the "Series E Subscription Agreements") for the sale of Series E
Stock and Series E Warrants. In addition to the conversion of the principal and
interest under the Series E Notes described above, investors under the Series E
Subscription Agreements agreed to invest $150,000 in cash and committed to
convert the $500,000 principal (plus accrued interest) under the September 2005
Note, and the $500,000 principal (plus accrued interest) under the outstanding
October 2005 Note (each as
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described above). Accordingly, Halo has taken the position that these notes were
amended by the Series E Subscription Agreement. Also under the Series E
Subscription Agreement, an investor agreed to convert $67,500 in certain
advisory fees due from Halo into Series E Stock and Warrants.
The material terms of the Subscription Agreements are as follows. Halo
designates the closing date. The closing is anticipated to occur when the Series
E Certificate of Designations becomes effective. The obligations of the
investors under the Series E Subscription Agreement are revocable if the closing
has not occurred within 30 days of the date of the agreement. No later than
seventy five (75) days after the completion of the offering, Halo agreed to file
with the SEC a registration statement covering the Halo common stock underlying
the Series E Stock and the Series E Warrants, and any common stock that Halo may
elect to issue in payment of the dividends due on the Series E Stock.
Upon the completion of this offering, with a full round of investment of
$10,000,000, the Series E investors will have the right for 15 months to invest,
in the aggregate, an additional $10,000,000 in common stock of Halo, at $2.00
per share of common stock (as adjusted for stock splits, reverse splits, and
stock dividends) or a 20% discount to the prior 30 day trading period, whichever
is lower. Each such investor's right shall be his, her or its pro rata amount of
the initial offering.
In the event that Halo completes or enters into agreements to sell equity
securities on or before February 15, 2006, investors in Series E Stock may
convert the securities received under the Series E Subscription Agreement into
such other equity securities as if the investor had invested the amount invested
in such securities. Halo will provide the Series E investors with five business
days notice of such right. The investor will be required to execute and deliver
all such transaction documents as required by Halo in order to convert such
securities into such other securities.
Certain of the transactions in connection with the Series E Subscription
Agreement were entered into by Mr. David Howitt, a director of Halo. Mr. Howitt
invested $350,000 under the Series E Notes, and agreed to invest another
$150,000 under the Series E Subscription Agreement. Mr. Howitt recused himself
from the Halo board of directors decisions approving these transactions.
Investors under the Series E Subscription Agreements have indicated to
Halo that they intend to exercise the right described above and receive the same
securities as were issued under the January 2006 Subscription Agreements. The
terms of the January 2006 Subscription Agreements are described more fully below
under " -- Recent Developments; January 2006 Subscription Agreements."
Issuance of common stock in connection with the Acquisition of Empagio
Halo entered into a merger agreement dated December 19, 2005, with
Empagio, certain stockholders of Empagio, and a wholly owned subsidiary of Halo.
On January 13, 2006, the closing under the merger agreement occurred and Empagio
became a wholly-owned subsidiary of Halo.
Upon the closing of the Empagio merger, Halo issued 1,438,455 shares of
its common stock. Halo has delivered to the Empagio stockholders 1,330,571
shares of Halo common stock and retained 107,884 shares of Halo common stock as
security for Empagio stockholder indemnification obligations under the merger
agreement (the "Empagio Indemnity
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Holdback Shares"). The Empagio Indemnity Holdback Shares shall be released to
the Empagio stockholders on the later of (i) the first anniversary of the
closing date of the transaction and (ii) the date any indemnification issues
pending on the first anniversary of the closing date are finally resolved.
January 2006 Convertible Promissory Notes
On January 27 and on January 30, 2006, Halo entered into certain
convertible promissory notes (the "January 2006 Convertible Notes") in the
aggregate principal amount of One Million Three Hundred Seventy-Five Thousand
Dollars ($1,375,000). The principal amount of the January 2006 Convertible
Notes, together with accrued interest, shall be due and payable on demand by the
holder thereof on the maturity date which is no earlier than sixty (60) days
after the date such January 2006 Convertible Notes were issued (the "Original
Maturity Date"), unless the January 2006 Convertible Notes are converted into
common stock and warrants as described below. In the event that the January 2006
Convertible Notes are not converted by their Original Maturity Date, interest
will begin to accrue at the rate of ten percent (10%) per annum.
Each January 2006 Convertible Note shall convert into (i) such number of
fully paid and non-assessable shares of Halo's common stock equal to the
aggregate outstanding principal amount due under the January 2006 Convertible
Note plus the amount of all accrued but unpaid interest on the January 2006
Convertible Note divided by $1.25, and (ii) warrants (the "January 2006
Warrants") to purchase a number of shares of Halo's common stock equal to 75% of
such number of shares of common stock. The January 2006 Convertible Notes shall
so convert automatically ("Mandatory Conversion") and with no action on the part
of the holder on their Original Maturity Date to the extent that upon such
conversion, the total number of shares of common stock then beneficially owned
by such holder does not exceed 9.99% of the total number of issued and
outstanding shares of Halo common stock. For such purposes, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder. In the event that a portion of the
principal and interest under the January 2006 Convertible Notes has not been
converted on the first Mandatory Conversion (and the holder has not demanded
payment), there will be subsequent mandatory conversions until all of the
principal and interest has been converted, provided that at each such Mandatory
Conversion the total number of shares of common stock then beneficially owned by
such lender does not exceed 9.99% of the total number of issued and outstanding
shares of common stock. Prior to any such mandatory conversion the holder may at
its option by writing to Halo, convert all or a portion of the principal and
interest due under such holder's January 2006 Convertible Notes into common
stock and January 2006 Warrants provided that at each such conversion the total
number of shares of common stock then beneficially owned by such holder does not
exceed 9.99% of the total number of issued and outstanding shares of Halo common
stock. By written notice to Halo, each holder may waive the foregoing
limitations on conversion but any such waiver will not be effective until the
61st day after such notice is delivered to Halo.
January 2006 Subscription Agreements
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Also on January 27 and January 30, 2006, Halo entered into certain
Subscription Agreements (the "January 2006 Subscription Agreements") for the
sale of the January 2006 Convertible Notes and the underlying common stock and
January 2006 Warrants.
The material terms of the January 2006 Subscription Agreements are as
follows. Halo and the investors under the January 2006 Subscription Agreements
made certain representations and warranties customary in private financings,
including representations from the Investors that they are "accredited
investors" as defined in Rule 501(a) of Regulation D ("Regulation D") under the
Securities Act.
The January 2006 Subscription Agreements further provide that Halo shall
register the shares of common stock issuable upon conversion of the January 2006
Convertible Notes and upon conversion of the January 2006 Warrants (together,
the "Registrable Shares") via a suitable registration statement If a
registration statement covering the Registrable Shares has not been declared
effective after 180 days following the closing, the holders shall receive a
number of shares of common stock equal to 1.5% of the number of shares received
upon conversion of the January 2006 Convertible Notes for each 30 days
thereafter during which the Registrable Shares have not been registered, subject
to a maximum penalty of 9% of the number of shares received upon conversion of
the January 2006 Convertible Notes.
The January 2006 Subscription Agreements allow the Investors to
"piggyback" on the registration statements filed by Halo. Halo agreed that it
will maintain the registration statement effective under the Securities Act
until the earlier of (i) the date that all of the Registrable Shares have been
sold pursuant to such registration statement, (ii) all Registrable Shares have
been otherwise transferred to persons who may trade such shares without
restriction under the Securities Act, or (iii) all Registrable Shares may be
sold at any time, without volume or manner of sale limitations pursuant to Rule
144(k) under the Securities Act.
Upon the completion of the offering under the January 2006 Subscription
Agreements, with a full round of investment of $10,000,000, the investors will
have the right for 15 months after the final closing to invest, in the aggregate
an additional $10,000,000 in common stock of Halo. The price of such follow-on
investment will be $2.00 per share of common stock or a 20% discount to the
prior 30 day trading period, whichever is lower; provided that the price per
share shall not be less than $1.25. Each investor's portion of this follow-on
right shall be such investor's pro rata amount of the January 2006 Convertible
Notes issued pursuant to the January 2006 Subscription Agreements. Once Halo has
issued a total of $5,000,000 of January 2006 Convertible Notes, the investors
will be able to invest up to 50% of the amount which they may invest pursuant to
this follow-on right; subsequent to the completion of the full round of
$10,000,000 the investors may invest the remainder of the amount which they may
invest pursuant to this follow-on right.
Notwithstanding anything to the contrary in the January 2006 Subscription
Agreements, the number of shares of common stock that may be acquired by any
investor upon any exercise of this follow-on right (or otherwise in respect
hereof) shall be limited to the extent necessary to insure that, following such
exercise (or other issuance), the total number of shares of common stock then
beneficially owned by such investor and its Affiliates and any other persons
whose beneficial ownership of common stock would be aggregated with such
investor for purposes of Section 13(d) of the Exchange Act, does not exceed
9.99% of the total number of issued and outstanding shares of Halo common stock.
By
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written notice to Halo, any investor may waive this provision, but any such
waiver will not be effective until the 61st day after such notice is delivered
to Halo.
In addition to the $1,375,000 in January 2006 Convertible Notes issued
January 27 and January 30, 2006, pursuant to the January 2006 Subscription
Agreements, the following investors have expressed an intention to exercise
their right to accept the terms of the January 2006 Subscription Agreements in
lieu of the Series E Subscription Agreements:
o the holder of the $500,000 principal amount September 2005 Note;
o the holder of the $500,000 principal amount October 2005 Note that
is still outstanding;
o the holders of the $700,000 principal amount of Series E Notes;
o David Howitt, who made a $150,000 short term loan to Halo;
o the investor who had agreed to convert $67,500 in certain advisory
fees due from Halo into a Series E Subscription Agreement.
It is a condition to the closing of the merger with Unify that all such
convertible notes and all shares of Halo preferred stock shall have been
converted into common stock of Halo.
Acquisition of ECI
On January 30, 2006, Halo entered into a Merger Agreement (the "Merger
Agreement") with ECI Acquisition, Inc., a Maryland corporation and wholly owned
subsidiary of Halo ("MergerSub"), Executive Consultants, Inc., a Maryland
corporation ("ECI"), and certain stockholders of ECI (the "Sellers"). On March
1, 2006, the closing occurred under the Merger Agreement. Accordingly, under the
terms of the Merger Agreement, MergerSub was merged with and into ECI (the
"Merger") and ECI survived the Merger and is now a wholly-owned subsidiary of
Halo. The total merger consideration for all of the equity interests in ECI (the
"Purchase Price") was $603,571 in cash and cash equivalents and 330,668 shares
of Halo's common stock (the "Halo Shares"), subject to adjustment based on the
Net Working Capital (as defined in the Merger Agreement) on the Closing Date.
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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): MARCH 31, 2006
WARP TECHNOLOGY HOLDINGS, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 000-33197 88-0467845
--------------------------- ------------- ------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
200 Railroad Avenue, Greenwich, 06830
Connecticut
------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203 422 2950
Not Applicable
-----------------------------------------------------------
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 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
11
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL
YEAR.
(a) Amendment to Articles of Incorporation
The registrant, Warp Technology Holdings, Inc. (the "Company") has filed with
the Nevada Secretary of State the Certificate of Amendment to Articles of
Incorporation described in its Definitive Information Statement filed on March
13, 2006. The amendment changes the Company's name to Halo Technology Holdings,
Inc., effective April 2, 2006. A copy of the amendment is included as Exhibit
3.13 hereto.
ITEM 8.01 OTHER EVENTS.
Change of Company Name and Trading Symbol.
The Company's name will change to Halo Technology Holdings, Inc. effective April
2, 2006.
Currently, the Company's Common Stock is quoted on the OTC Bulletin Board under
the symbol WARP. As a consequence of the name change, the Company's symbol will
change. The new symbol will be HALO. The new symbol will be effective at the
open of business on Monday, April 3, 2006.
Stock Certificates.
After the name change becomes effective, there is no requirement that
stockholders obtain new or replacement stock certificates. However, each
stockholder of record of shares of the Company's Common Stock outstanding
immediately prior to the name change may contact the Company's Transfer Agent to
exchange the certificates representing such stockholder's shares for new
certificates reflecting the new name of the Company.
The Company's Transfer Agent is the Pacific Stock Transfer Company. The contact
information for the Company's Transfer Agent is as follows:
Pacific Stock Transfer Company
500 E. Warm Springs Road
Suite 240
Las Vegas, NV 89119
Phone: (702) 361-3033
Facsimile: (702) 433-1979
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
12
(d) Exhibits.
Exhibit No. Description
3.13 Certificate of Amendment to Articles of Incorporation effective
April 2, 2006.
--------------------------------------------------------------------------------
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.
Warp Technology Holdings, Inc.
March 31, 2006 By: Ernest C. Mysogland
-------------------------------
Name: Ernest C. Mysogland
Title: Executive Vice President
--------------------------------------------------------------------------------
Exhibit Index
EXHIBIT NO. DESCRIPTION
3.13 Certificate of Amendment to Articles of Incorporation
effective April 2, 2006.
13
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 31, 2006
HALO TECHNOLOGY HOLDINGS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 000-33197 88-0467845
----------------------------- ------------- ------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
200 Railroad Avenue, Greenwich, Connecticut 06830
------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203 422 2950
WARP TECHNOLOGY HOLDINGS, INC.
-----------------------------------------------------------
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 240.14d-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.
Amendment to Subordinated Note to Platinum Equity, LLC
As previously reported, on October 26, 2005, the registrant, Halo Technology
Holdings, Inc., formerly known as Warp Technology Holdings, Inc. ("Halo" or the
"Company"), completed the transactions contemplated by the Merger Agreement (the
"Merger Agreement") dated as of September 12, 2005 by and among the Company,
TAC/Halo, Inc., a wholly owned subsidiary of the Company (the "Merger Sub"),
Tesseract Corporation ("Tesseract") and Platinum Equity, LLC ("Platinum"), as
amended by Amendment No. 1 to the Merger Agreement, dated October 26, 2005, by
and among, the Company, Platinum, Tesseract, Merger Sub and TAC/Halo, LLC, a
Delaware limited liability company and wholly owned subsidiary of the Company
("New Merger Sub"). The consideration payable pursuant to the Merger Agreement
to Platinum included $1,750,000 payable no later than March 31, 2006 and
evidenced by a Promissory Note (the "Note").
14
The descriptions of the Merger Agreement, Amendment No. 1 to the Merger
Agreement and the Note are qualified in their entirety by reference to the
Merger Agreement, which was previously filed as Exhibit 10.87 of the Current
Report on Form 8-K filed by the Company with the Securities and Exchange
Commission on September 16, 2005, to Amendment No. 1 to the Merger Agreement
which was previously filed as Exhibit 10.94 of the Current Report on Form 8-K
filed by the Company with the Commission on November 1, 2005, and to the Note
which was previously filed as Exhibit 10.96 of the Current Report on Form 8-K
filed by the Company with the Commission on November 1, 2005.
On March 31, 2006, the Company and Platinum entered into an Amendment and
Consent, (the "Amendment"). Pursuant to the Amendment, the maturity of the Note
was modified such that the aggregate principal amount of the Note and all
accrued interest thereon shall be due and payable as follows: (i) $1,000,000 on
March 31, 2006; and (ii) the remaining $750,000 in principal, plus all accrued
but unpaid interest on the earliest of (w) the second business day following the
closing of the acquisition of Unify Corporation by the Company, (x) the second
business day following termination of the merger agreement pursuant to which
Unify is to be acquired by the Company, (y) the second business day after the
Company closes an equity financing of at least $2.0 million subsequent to the
date of the Amendment or (z) July 31, 2006. In accordance with the Amendment,
$1,000,000 was paid to Platinum on March 31, 2006. This description of the
Amendment is qualified in its entirety by reference to the Amendment, attached
as Exhibit 10.120 hereto and incorporated herein by reference. Since the entire
amount of the Note was not paid on or before March 31, 2006, Platinum retained
909,091 shares of Series D Preferred Stock of the Company, which had been
previously issued to Platinum as part of the consideration under the Merger
Agreement. These shares would have been canceled if the Note had been paid in
full by that date.
Material Relationship to Platinum
Platinum holds 7,045,454 shares of the Company's Series D Preferred Stock, which
is convertible into 7,045,454 shares of the Company's common stock. Furthermore,
under the Merger Agreement, as amended, Platinum has the right to convert
certain working capital adjustments into an additional 1,818,182 shares of
Series D Preferred Stock. Gupta Holdings, LLC, an affiliate of Platinum, owns
2,020,000 shares of Series C Preferred Stock of the Company, which is
convertible into 2,020,000 shares of Common Stock of the Company, and warrants
to acquire 2,312,336 shares of Common Stock. As of March 23, 2006, the Company
had 7,810,840 shares of Common Stock issued and outstanding, 13,362,688 shares
of Series C Preferred Stock issued and outstanding and 7,045,454 shares of
Series D Preferred Stock issued and outstanding. Accordingly, if all of the
Company's outstanding preferred stock were converted into common, Platinum would
hold approximately 25% of the then outstanding shares of Common Stock of the
Company, and Gupta Holdings would hold approximately 7% of the then outstanding
shares of Common Stock of the Company. However, there are certain restrictions
in the Series D and Series C Preferred Stock, as well as on the warrants held by
Gupta Holdings, which restrict conversion in certain circumstances so that the
holder does not acquire more than 9.9% of the Company's then outstanding Common
Stock.
15
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
Ex. No. Description
10.120 Amendment and Consent between the Company and Platinum Equity,
LLC, dated March 31, 2006.
--------------------------------------------------------------------------------
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.
Halo Technology Holdings, Inc.
April 3, 2006 By: Ernest C. Mysogland
-----------------------------
Name: Ernest C. Mysogland
Title: Executive Vice President
--------------------------------------------------------------------------------
Exhibit Index
EXHIBIT NO. DESCRIPTION
10.120 Amendment and Consent between the Company and Platinum Equity,
LLC, dated March 31, 2006
16