SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
January 9, 2013
Computer Systems, Inc.
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation)
|(Commission File Number)
||(I.R.S. Employer Identification No.)|
101 West Renner Road, Suite 300
|(Address of Principal Executive Offices)
(Registrant’s Telephone Number, Including Area Code)
(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
On January 9, 2013
Vertical Computer Systems, Inc.’s (the “Company”) subsidiary, Now Solutions, Inc. (“Now Solutions”),
secured financing in the aggregate amount of $1,759,150, which amount was utilized to pay off existing indebtedness of the Company
and its subsidiaries to Tara Financial Services, Inc. (“Tara Financial”) and Robert Farias (“Farias”),
an employee of the Company.
The Company and several
of its subsidiaries entered into a loan agreement (the “Loan Agreement”), dated as of January 9, 2013 with Lakeshore
Investment, LLC (“Lakeshore”) under which Now Solutions issued a secured ten (10) year promissory note (the “Note”)
bearing interest at 11% per annum to Lakeshore in the amount of $1,759,150 payable in equal monthly installments of $24,232 until
January 31, 2022. The Note contains provisions requiring additional principal reductions in the event sales by Now Solutions exceed
certain financial thresholds.
Pursuant to the Loan
Agreement, the Company agreed to make principal payments toward the Note of $90,000 by January 31, 2013, which is secured by 10%
of the Company’s ownership interest in Priority Time Systems, Inc. (“Priority Time”) and $600,000 by February
28, 2013, which is secured by 20% of the Company’s ownership interest in Now Solutions. The Loan Agreement also contains
provisions requiring certain additional principal prepayments toward the Note by the Company from any litigation or settlement
proceeds regarding its SiteFlash technology less any attorney fees and direct Costs (“Net Claim Proceeds”).
The Notes are secured
by the assets of the Company’s subsidiaries, Now Solutions, Priority Time, SnAPPnet, Inc. (“SnAPPnet”) and the
Company’s SiteFlash technology and are cross-collateralized. Upon the aggregate principal payment of $290,000 toward the
Note, the Company has the option to have Lakeshore release either the Priority Time collateral or the SiteFlash collateral. Upon
payment of the aggregate principal $590,000 toward the Note, Lakeshore shall release either the Priority Time collateral or the
SiteFlash collateral (whichever is remaining). Upon payment of the aggregate principal $890,000 toward the Note, Lakeshore shall
release the SnAPPnet collateral and upon full payment of the Note, Lakeshore shall release the Now Solutions collateral.
As additional consideration
for the loan, the Company granted a 5% interest in net claim proceeds (less any attorney’s fees and direct costs) from any
litigation or settlement proceeds related to the SiteFlash technology to Lakeshore. In addition, until the Note is paid in full,
Now Solutions agreed to pay a Lakeshore royalty of 5% of its annual gross revenues in excess of $5 million dollars up to a maximum
Section 9 – Financial Statements and Exhibits.
Item 9.01. Financial Statements and Exhibits.
10.1 Secured Term Promissory Note in the principal amount of $1,759,150, payable by Now Solutions to Lakeshore Investment,
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.
||Vertical Computer Systems, Inc.|
|Date: January 15, 2013
||/s/ Richard Wade|
||Richard Wade |