Attached files
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| EX-2.01(B) - AMERICAN DEFENSE SYSTEMS INC | v216242_ex2-01b.htm |
| EX-2.01(A) - AMERICAN DEFENSE SYSTEMS INC | v216242_ex2-01a.htm |
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 28, 2011 (March 22, 2011)
American Defense Systems, Inc.
(Exact Name of Registrant as Specified in its Charter)
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Delaware
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001-33888
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83-0357690
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(State or Other
Jurisdiction of Incorporation)
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(Commission File Number)
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(IRS Employer
Identification No.)
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230 DUFFY AVENUE
HICKSVILLE, NY 11801
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (516) 390-5300
(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 ( See General Instruction A.2. below):
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a- 12 under the Exchange Act (17 CFR 240.14a- 12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.01.
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Completion of Acquisition or Disposition of Assets
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On March 22, 2011, American Defense Systems, Inc. (the “Company”) entered into a Securities Redemption Agreement (the "Redemption Agreement") with West Coast Opportunity Fund, LLC ("WCOF"); and Centaur Value Fund, L.P. ("CVF" and, together with WCOF, the "Stockholders"), pursuant to which the Company sold to the Stockholders all of the issued and outstanding membership interests (the "APSG Interests") in American Physical Security Group, LLC ("APSG"), a wholly-owned subsidiary of the Company. The Stockholders own an aggregate of 15,000 shares of the Company’s Series A Convertible Preferred Stock (the “Shares”). In exchange for the sale of the APSG Interests to the Stockholders, the Stockholders (i) paid the Company One Million Dollars ($1,000,000) in cash at the closing of the transactions contemplated by the Redemption Agreement and (ii) tendered to the Company the Shares, which had an aggregate redemption price of $16,500,000. Upon the closing of the transactions contemplated by the Redemption Agreement, the Stockholders will own 100% of the APSG Interests and APSG will no longer be a subsidiary of the Company.
The Redemption Agreement contains customary representations, warranties, covenants and indemnities. The representations and warranties of the Company relate to, among other things, (a) corporate organization and authorization, (b) transactions and company assets, (c) title to assets, (d) capitalization, (e) litigation, (f) intellectual property rights and (k) financial statements. Pursuant to the Redemption Agreement, the Company, on the one hand, and the Stockholders on the other, will indemnify and hold the other harmless as a result of, among other things, the breach of the representations, warranties or covenants in the Redemption Agreement. The Redemption Agreement provides for a maximum limit on indemnification by the Company of $1,000,000. In addition, pursuant to the Redemption Agreement, the Company and Stockholders agreed to a release each other from any and all claims arising prior to the date of the Redemption Agreement; however, such release does not apply to claims arising under the Redemption Agreement and the Option Agreement.
In connection with the Redemption Agreement, the Company and the Stockholders entered into that certain Membership Interest Option Agreement (the "Option Agreement") pursuant to which the Stockholders granted the Company an option (the “Option”) to repurchase the APSG Interests within six (6) months following the closing of the transactions contemplated by the Redemption Agreement at a cash purchase price equal to the sum of (i) $15,525,000, plus (ii) the amount of any net investment made in APSG concurrently with and following the closing of the Redemption Agreement and prior to the closing of the purchase of the APSG membership interests pursuant to exercise of the Option.
The description of the terms of the Redemption Agreement and Option Agreement set forth herein is qualified in its entirety to the full text of the Redemption Agreement and Option Agreement, each of which is filed as an exhibit hereto.
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Item 9.01
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Financial Statements and Exhibits.
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(b)
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Pro forma Consolidated Financial Information (Unaudited)
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F-1
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Pro forma Consolidated Balance Sheet at September 30, 2010
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F-2
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Pro forma Consolidated Statement of Income for the Nine Months Ended September 30, 2010
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F-3
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Pro forma Consolidated Statement of Operations for the Year Ended December 31, 2009
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F-4
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Notes to Unaudited Consolidated Pro Forma Financial Information
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F-5
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(b) Pro forma Consolidated Financial Information (Unaudited)
The following unaudited pro forma financial data has been derived from the historical consolidated financial statements of American Defense Systems, Inc. (the “Company”) as of and for the nine months ended September 30, 2010 and for the year ended December 31, 2009. The pro forma financial information is presented to reflect the effects of the Securities Redemption Agreement entered into on March 22, 2010 whereby the holders of the Company’s Series A convertible preferred stock agreed to redeem all of the outstanding shares of Series A convertible preferred stock, with a redemption value of $16,500,000, and provide the Company with $1,000,000 in cash, in exchange for all of the outstanding membership interests in American Physical Securities Group, LLC, the Company’s wholly owned subsidiary. The unaudited pro forma consolidated balance sheet gives effect to the transaction as if it had occurred on September 30, 2010. The unaudited pro forma consolidated statements of income (operations) give effect to the transaction as if it had occurred at the beginning of the periods presented. The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable and are described in the notes accompanying the unaudited consolidated pro forma financial information. The unaudited pro forma financial data does not purport to represent what the Company’s results of operations or financial positions would have been had the transaction occurred on the dates indicated, or to project the Company’s results of operations or financial position for any future period or date, nor does it give effect to any matters other than those described in the notes thereto.
F-1
American Defense Systems, Inc. and Subsidiaries
Pro forma Consolidated Balance Sheet (Unaudited)
At September 30, 2010
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American
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Physical Securities
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American Defense
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Group, LLC
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Systems, Inc.
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Historical
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Transaction
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Historical
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(a)
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Adjustments
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Pro forma
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ASSETS
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CURRENT ASSETS
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Cash
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$ | 2,012,351 | $ | (150,797 | ) | $ | 1,000,000 | (b) | $ | 2,861,554 | ||||||
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Accounts receivable, net
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2,059,895 | (1,177,533 | ) | - | 882,362 | |||||||||||
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Accounts receivable factoring
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441,314 | - | - | 441,314 | ||||||||||||
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Tax receivable
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333,258 | - | - | 333,258 | ||||||||||||
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Costs in excess of billings on uncompleted contracts, net
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2,937,325 | (985,988 | ) | - | 1,951,337 | |||||||||||
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Prepaid expenses and other current assets
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369,354 | (10,993 | ) | - | 358,361 | |||||||||||
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TOTAL CURRENT ASSETS
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8,153,497 | (2,325,311 | ) | 1,000,000 | 6,828,186 | |||||||||||
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Property and equipment, net
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2,436,074 | (19,262 | ) | - | 2,416,812 | |||||||||||
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Deferred financing costs, net
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636,636 | - | (636,636 | ) (c) | - | |||||||||||
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Notes receivable, net
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400,000 | - | - | 400,000 | ||||||||||||
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Intangible assets
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634,450 | (634,450 | ) | - | - | |||||||||||
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Goodwill
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812,500 | - | (812,500 | ) (d) | - | |||||||||||
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Deposits
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652,137 | - | - | 652,137 | ||||||||||||
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TOTAL ASSETS
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$ | 13,725,294 | $ | (2,979,023 | ) | $ | (449,136 | ) | $ | 10,297,135 | ||||||
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LIABILITIES
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CURRENT LIABILITIES
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Accounts payable
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$ | 4,834,541 | $ | (1,026,057 | ) | $ | - | $ | 3,808,484 | |||||||
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Accrued expenses
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426,292 | (94,155 | ) | - | 332,137 | |||||||||||
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Warrant liability
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9,915 | - | - | 9,915 | ||||||||||||
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TOTAL CURRENT LIABILITIES
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5,270,748 | (1,120,212 | ) | - | 4,150,536 | |||||||||||
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LONG TERM LIABILITIES
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Mandatory redeemable Series A convertible preferred stock (cumulative), 15,000 shares authorized issued and outstanding
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13,966,268 | - | (13,966,268 | ) (e) | - | |||||||||||
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Deferred rent
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198,243 | - | - | 198,243 | ||||||||||||
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TOTAL LIABILITIES
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19,435,259 | (1,120,212 | ) | (13,966,268 | ) | 4,348,779 | ||||||||||
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COMMITMENTS AND CONTINGENCIES
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SHAREHOLDERS' EQUITY (DEFICIENCY)
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Common stock
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51,971 | - | - | 51,971 | ||||||||||||
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Additional paid-in capital
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16,088,766 | - | - | 16,088,766 | ||||||||||||
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Accumulated deficit
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(21,850,702 | ) | (1,858,811 | ) | 13,517,132 | (f) | (10,192,381 | ) | ||||||||
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TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY)
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(5,709,965 | ) | (1,858,811 | ) | 13,517,132 | 5,948,356 | ||||||||||
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
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$ | 13,725,294 | $ | (2,979,023 | ) | $ | (449,136 | ) | $ | 10,297,135 | ||||||
See notes to unaudited consolidated pro forma financial information.
F-2
American Defense Systems, Inc. and Subsidiaries
Pro forma Consolidated Statement of Income (Unaudited)
For the Nine Months Ended September 30, 2010
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American
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Physical Securities
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American Defense
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Group, LLC
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Systems, Inc.
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Historical
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Transaction
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Historical
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(g)
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Adjustments
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Pro forma
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CONTRACT REVENUES EARNED
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$ | 35,610,715 | $ | (7,144,299 | ) | $ | - | $ | 28,466,416 | |||||||
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COST OF REVENUES EARNED (exclusive of depreciation shown separately below)
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24,243,958 | (5,548,898 | ) | - | 18,695,060 | |||||||||||
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GROSS PROFIT
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11,366,757 | (1,595,401 | ) | - | 9,771,356 | |||||||||||
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OPERATING EXPENSES
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General and administrative expenses
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4,729,578 | (1,526,514 | ) | - | 3,203,064 | |||||||||||
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General and administrative salaries
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2,687,891 | - | - | 2,687,891 | ||||||||||||
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Sales and marketing
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1,565,749 | (23,246 | ) | - | 1,542,503 | |||||||||||
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T2 expenses
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629,838 | - | - | 629,838 | ||||||||||||
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Research and development
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548,464 | - | - | 548,464 | ||||||||||||
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Depreciation
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870,120 | (5,467 | ) | - | 864,653 | |||||||||||
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Professional fees
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1,369,660 | - | - | 1,369,660 | ||||||||||||
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TOTAL OPERATING EXPENSES
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12,401,300 | (1,555,227 | ) | - | 10,846,073 | |||||||||||
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OPERATING LOSS
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(1,034,543 | ) | (40,174 | ) | - | (1,074,717 | ) | |||||||||
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OTHER INCOME (EXPENSE)
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Unrealized loss on adjustment of fair value Series A convertible preferred stock classified as a liability
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(923,609 | ) | - | 923,609 | (h) | - | ||||||||||
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Unrealized gain on warrant liability
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25,498 | - | - | 25,498 | ||||||||||||
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Interest expense
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(1,585,111 | ) | - | 1,577,628 | (i) | (7,483 | ) | |||||||||
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Interest expense - mandatorily redeemable preferred stock dividends
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(1,125,000 | ) | - | 1,125,000 | (j) | - | ||||||||||
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Finance charge
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(268,793 | ) | - | - | (268,793 | ) | ||||||||||
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Gain on redemption of preferred stock and sale of APSG
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- | - | 11,658,321 | (k) | 11,658,321 | |||||||||||
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TOTAL OTHER INCOME (EXPENSE)
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(3,877,015 | ) | - | 15,284,558 | 11,407,543 | |||||||||||
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INCOME (LOSS) BEFORE INCOME TAXES
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(4,911,558 | ) | (40,174 | ) | 15,284,558 | 10,332,826 | ||||||||||
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INCOME TAX EXPENSE
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- | - | (1,247,000 | ) (l) | (1,247,000 | ) | ||||||||||
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NET INCOME (LOSS)
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$ | (4,911,558 | ) | $ | (40,174 | ) | $ | 14,037,558 | $ | 9,085,826 | ||||||
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Weighted Average Shares Outstanding (Basic and Diluted)
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48,033,067 | 48,033,067 | ||||||||||||||
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NET INCOME (LOSS) per Share - Basic and Diluted
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$ | (0.10 | ) | $ | 0.19 | |||||||||||
See notes to unaudited consolidated pro forma financial information.
F-3
American Defense Systems, Inc. and Subsidiaries
Pro forma Consolidated Statement of Operations (Unaudited)
For the Year Ended December 31, 2009
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American
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Physical Securities
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American Defense
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Group, LLC
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Systems, Inc.
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Historical
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Transaction
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Historical
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(m)
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Adjustments
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Pro forma
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(Audited)
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(Unaudited)
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CONTRACT REVENUES EARNED
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$ | 45,893,979 | $ | (4,503,725 | ) | $ | - | $ | 41,390,254 | |||||||
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COST OF REVENUES EARNED (exclusive of depreciation shown separately below)
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33,929,327 | (2,170,515 | ) | - | 31,758,812 | |||||||||||
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GROSS PROFIT
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11,964,652 | (2,333,210 | ) | - | 9,631,442 | |||||||||||
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OPERATING EXPENSES
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General and administrative expenses
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7,519,114 | (1,608,137 | ) | - | 5,910,977 | |||||||||||
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General and administrative salaries
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4,144,666 | - | - | 4,144,666 | ||||||||||||
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Sales and marketing
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2,661,636 | (3,358 | ) | - | 2,658,278 | |||||||||||
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T2 expenses
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531,506 | - | - | 531,506 | ||||||||||||
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Research and development
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412,285 | - | - | 412,285 | ||||||||||||
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Settlement of litigation
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63,441 | - | - | 63,441 | ||||||||||||
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Depreciation
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1,085,331 | - | - | 1,085,331 | ||||||||||||
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Professional fees
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2,734,816 | - | - | 2,734,816 | ||||||||||||
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TOTAL OPERATING EXPENSES
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19,152,795 | (1,611,495 | ) | - | 17,541,300 | |||||||||||
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OPERATING LOSS
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(7,188,143 | ) | (721,715 | ) | - | (7,909,858 | ) | |||||||||
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OTHER INCOME (EXPENSE)
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Unrealized loss on adjustment of fair value Series A convertible preferred stock classified as a liability
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(325,837 | ) | - | 325,837 | (n) | - | ||||||||||
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Unrealized gain on warrant liability
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35,673 | - | - | 35,673 | ||||||||||||
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Loss on deemed extinguishment of debt
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(2,613,630 | ) | - | 2,613,630 | (o) | - | ||||||||||
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Other income
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8,869 | - | - | 8,869 | ||||||||||||
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Interest expense
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(3,019,079 | ) | - | 1,970,235 | (p) | (1,048,844 | ) | |||||||||
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Interest expense - mandatorily redeemable preferred stock dividends
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(1,650,000 | ) | - | 1,650,000 | (q) | - | ||||||||||
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Finance charge
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(209,698 | ) | - | - | (209,698 | ) | ||||||||||
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Gain on redemption of preferred stock and sale of APSG
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- | - | 8,518,002 | (r) | 8,518,002 | |||||||||||
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TOTAL OTHER INCOME (EXPENSE)
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(7,773,702 | ) | - | 15,077,704 | 7,304,002 | |||||||||||
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INCOME (LOSS) BEFORE INCOME TAXES FROM CONTINUING OPERATIONS
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(14,961,845 | ) | (721,715 | ) | 15,077,704 | (605,856 | ) | |||||||||
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INCOME TAX EXPENSE
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(752,971 | ) | - | (119,000 | ) (s) | (871,971 | ) | |||||||||
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INCOME (LOSS) FROM CONTINUING OPERATIONS
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(15,714,816 | ) | (721,715 | ) | 14,958,704 | (1,477,827 | ) | |||||||||
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Weighted Average Shares Outstanding (Basic and Diluted)
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43,192,175 | 43,192,175 | ||||||||||||||
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INCOME (LOSS) FROM CONTINUING OPERATIONS per Share - Basic and Diluted
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$ | (0.37 | ) | $ | (0.03 | ) | ||||||||||
See notes to unaudited consolidated pro forma financial information.
F-4
American Defense Systems, Inc. and Subsidiaries
Notes to Unaudited Consolidated Pro Forma Financial Information
The Company has made the following pro forma adjustments to arrive at the pro forma consolidated balance sheet at September 30, 2010.
(a) Represents the elimination of the balance sheet of American Physical Security Group (“APSG”) at September 30, 2010 as a result of the exchange of the membership interest in APSG for cash and the redemption of the Series A convertible preferred stock.
(b) Represents the cash received in the transaction.
(c) Represents the removal of the deferred financing costs associated with the issuance of the Series A convertible preferred stock.
(d) Represents the removal of the goodwill associated with the acquisition of APSG.
(e) Represents the removal of the fair value of the Series A convertible preferred stock.
(f) Represents the offset of the pro forma adjustments (b) through (e).
The Company has made the following pro forma adjustments to arrive at the pro forma consolidated statement of income for the nine months ended September 30, 2010.
(g) Represents the elimination of the income statement of APSG for the nine months ended September 30, 2010.
(h) Represents the elimination of the unrealized loss on adjustment of fair value of the Series A convertible preferred stock.
(i) Represents the elimination of the interest expense related to the amortization of the deferred financing costs associated with the issuance of the Series A convertible preferred stock and the amortization of the debt discount on the Series A convertible preferred stock.
(j) Represents the elimination of the interest expense related to the dividends on the Series A convertible preferred stock.
(k) Represents the difference between the cash received and the fair value of the Series A convertible preferred stock compared to the net book value of APSG, including the related goodwill and the write-down of the deferred financing costs associated with the issuance of the Series A convertible preferred stock.
(l) Represents the estimated tax effect, applying statutory tax rates, of pro forma adjustments (g) and (k) after giving effect to the Company’s estimated Net Operating Loss Carryforwards.
The Company has made the following pro forma adjustments to arrive at the pro forma consolidated statement of income for the year ended December 30, 2009.
(m) Represents the elimination of the income statement of APSG for the year ended December 31, 2009.
(n) Represents the elimination of the unrealized loss on adjustment of fair value of the Series A convertible preferred stock.
(o) Represents the elimination of the loss on the deemed extinguishment of the Series A convertible preferred stock.
(p) Represents the elimination of the interest expense related to the amortization of the deferred financing costs associated with the issuance of the Series A convertible preferred stock and the amortization of the debt discount on the Series A convertible preferred stock.
(q) Represents the elimination of the interest expense related to the dividends on the Series A convertible preferred stock.
(r) Represents the difference between the cash received and the fair value of the Series A convertible preferred stock compared to the net book value of APSG, including the related goodwill and the write-down of the deferred financing costs associated with the issuance of the Series A convertible preferred stock.
(s) Represents the estimated tax effect, applying statutory tax rates, of pro forma adjustments (m) and (r) after giving effect to the Company’s estimated Net Operating Loss Carryforwards.
F-5
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Item 9.01
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Financial Statements and Exhibits.
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(d)
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Exhibits
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2.01(a)
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Securities Redemption Agreement, dated March 22, 2011, by and among American Defense Systems, Inc.; West Coast Opportunity Fund, LLC; and Centaur Value Fund, L.P.
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2.01(b)
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Membership Interest Option Agreement, dated March 22, 2011, by and among American Defense Systems, Inc., West Coast Opportunity Fund, LLC, and Centaur Value Fund, LP
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: March 28, 2011
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AMERICAN DEFENSE SYSTEMS, INC.
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By:
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/s/ Gary Sidorsky
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Chief Financial Officer
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EXHIBIT INDEX
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Exhibit
Number
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Exhibit
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2.01(a)
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Securities Redemption Agreement, dated March 22, 2011, by and among American Defense Systems, Inc.; West Coast Opportunity Fund, LLC; and Centaur Value Fund, L.P.
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2.01(b)
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Membership Interest Option Agreement, dated March 22, 2011, by and among American Defense Systems, Inc., West Coast Opportunity Fund, LLC, and Centaur Value Fund, LP
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