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): July 16, 2008
ESPRE
SOLUTIONS, INC.
(Exact
name of registrant as specified in its charter)
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NEVADA
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000-51577
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68-0576847
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification Number)
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5700
W. Plano Parkway, Suite 2600, Plano, Texas 75093
(Address
of Principal Executive Offices)
(214) 254-3708
(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 obligations of the registrant under any of the following
provisions:
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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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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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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The
information set forth under Item 3.02 of this Current Report on Form 8-K is
incorporated by reference in response to this Item 1.01.
Item 2.03.
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
The
information set forth under Item 3.02 of this Current Report on Form 8-K is
incorporated by reference in response to this Item 2.03.
Item 3.02. Unregistered
Sales of Equity Securities.
On July
16, 2008, Espre Solutions, Inc (the “Company”), closed the private placement of
a debenture (the “Debenture”) for gross proceeds of $2,000,000, of which
$250,000 was paid at closing and the balance of $1,750,000 is payable by a
promissory note due January 30, 2011 (the “Promissory Note”), to a single
institutional investor pursuant to a Securities Purchase Agreement dated as of
July 15, 2008 (the “Securities Purchase Agreement”). The Debenture is
convertible into shares of the Company’s common stock at a price equal to the
dollar amount of the Debenture being converted divided by a conversion price
equal to the lesser of (i) $0.65 or (ii) 82% of the three lowest Volume Weighted
Average Prices during the 20 trading days prior to the election to convert,
provided that if the Volume Weighted Average Price per share is less than $0.10
on the date of election, the Company can prepay the amount to be converted, plus
accrued but unpaid interest, at 115% of such amount. The Debenture is
secured by the pledge by non-affiliates of the Company of 6,000,000 shares of
the Company’s common stock which the pledgors own. Interest is
payable on the Debenture at the rate of 6% per annum, paid monthly on the
15th
day of each month.
Interest
on the purchaser’s $1,750,000 Promissory Note is payable at a rate of six and
one-quarter percent (6¼%) per annum monthly on the 15th day of
each month. In the event that the Company’s common stock trades at a
price of less than $0.06 per share or lower at any time during the six month
period commencing on the date of the issuance of the Promissory Note, then the
interest payable on the Promissory Note is immediately decreased to four and
three-quarter percent (4¾%). The purchaser has the obligation to
prepay any portion of the Promissory Note on a monthly basis commencing one
hundred eighty (180) days from the issuance of the Promissory Note on any date
of such month during which the Promissory Note remains outstanding in an amount
equal to not less than $500,000, provided that the purchaser can immediately
sell all of the common stock issued at conversion pursuant to Rule 144, no Event
of Default (as defined in the Debenture) has occurred, the average Volume
Weighted Average Price per share of the Company’s common stock for every period
of ten consecutive trading days during the term of the Promissory Note is not
less than $0.062 per share, and the Company shall have honored all conversion
notices submitted by the purchaser. The Promissory Note is secured by
substantially all the purchaser’s assets and is subordinated to any senior
indebtedness of the purchaser.
In
addition to the Debenture, the purchaser agreed, pursuant to the Securities
Purchase Agreement, to purchase a second debenture in the principal amount of
$2,000,000, payable $250,000 at closing and the balance by a $1,750,000
promissory note, with both instruments having the same terms as the Debenture
and the purchaser’s $1,750,000 Promissory Note described above. If
the purchaser does not fund the second debenture, then its sole liability to the
Company shall be to pay the Company $25,000 as a non-funding penalty, or $5,000
in the event that the Company’s common stock trades at $0.062 per share or lower
at any time during the six month period commencing with the date of issuance of
the Debenture. The purchaser also has the right not to fund the
second debenture under certain circumstances, including the Company’s common
shares not trading on the OTC Bulletin Board or the Company’s common stock
trading at a price that is $0.031 per share or lower at any time during the
six-month period following the date of issuance of the Debenture.
The
Company did not use any form of advertising or general solicitation in
connection with the sale of the Debenture. The sale of the Debenture was made in
reliance on an exemption provided by Section 4(2) of the Securities Act of 1933,
as amended.
The
Debenture and shares of common stock issuable upon conversion of the Debenture
(collectively, the “Securities”) have not been registered under the Securities
Act and may not be offered or sold in the United States absent registration
under the Securities Act and applicable state securities laws or an applicable
exemption from those registration requirements, and all certificates
representing the Securities are imprinted with a restrictive legend to that
effect.
In
connection with the private placement, the Company incurred expenses which
included, without limitation, a finder’s fee, legal fees and other miscellaneous
expenses of approximately $150,000. The finder’s fee is payable only upon the
amount of cash received by the Company; therefore only $17,500 was paid on the
initial drawdown of $250,000.
The
description of the private placement in this Current Report on Form 8-K does not
purport to be complete and is qualified in its entirety by reference to the
Securities Purchase Agreement filed as Exhibit 4.4, the Form of 6% Senior
Convertible Debenture filed as Exhibit 4.5, the Form of Secured Promissory Note
filed as Exhibit 4.6, and the Form of Stock Pledge Agreement filed as Exhibit
4.7 to this Current Report on Form 8-K (collectively, the “Transaction
Documents”), all of which are incorporated herein by reference. The
Transaction Documents have been included to provide investors and security
holders with information regarding their terms. They are not intended
to provide any other factual information about the Company. The
Transaction Documents contain certain representations, warranties and
indemnifications resulting from any breach of such representations or
warranties. Investors and security holders should not rely on the
representations and warranties as characterizations of the actual state of facts
because they were made only as of the respective dates of the Transaction
Documents. In addition, information concerning the subject matter of
the representations and warranties may change after the respective dates of the
Transaction Documents, and such subsequent information may not be fully
reflected in the Company’s public disclosures.
On July
18, 2008, the Company filed a Certificate of Withdrawal with respect to its
Series A Cumulative Convertible Preferred Stock, none of which was then issued
or outstanding, and filed a Certificate of Designation for its Series B
Preferred Stock (the “Certificate of Designation”) establishing the rights,
preferences, privileges, qualifications, restrictions, and limitations relating
to the Series B Preferred Stock, of which 5,000,000 shares are authorized and
none are issued or outstanding.
Under the
terms of the Series B Preferred Stock, the holders of shares of that stock shall
be entitled to receive a cumulative quarterly cash dividend at an annual rate of
$0.07 per share to be paid in preference to the holders of shares of common
stock. Holders of Series B Preferred Stock shall be entitled to fifty
(50) votes for each share of Series B Preferred Stock held with respect to any
and all matters presented to the stockholders of the Company. The
consent of holders of a majority of Series B Preferred Stock, voting separately
as a single class, shall be necessary for the Company to sell all or
substantially all of the Company’s assets or effect any merger, consolidation,
share exchange or similar transaction to which the Company is a
party. Holders of Series B Preferred Stock shall have the right to
convert their shares of common stock at a ratio of five shares of common stock
for each share of Series B Preferred Stock The Company can redeem
Series B Preferred shares at any time at its option at a redemption price of
$2.50 per share plus any unpaid dividends. Upon liquidation, holders
of the Series B Preferred Stock shall be entitled to $1.00 per share of Series B
Preferred Stock. Upon any merger of the Company with another company
in which the Company is not the surviving corporation, or the sale of all or
substantially all of the assets of the Company, holders of Series B Preferred
Stock are entitled to a preference of $1.00 per share of the proceeds of any
such transaction or event. The Company has the obligation to register
shares of common stock underlying the Series B Preferred Stock under certain
circumstances described in the Certificate of Designation.
The terms
of the Series B Preferred Stock are more fully described in the Certificate of
Designation establishing the rights, preferences, privileges, qualifications,
restrictions and limitations relating to the Series B Preferred
Stock.
The
Company plans to issue an aggregate of 5,000,000 shares Series B Preferred Stock
to the Chief Executive Officer and the President (the “Officers”) in August 2008
in consideration for the cancellation of 13,055,556 common shares and 4,938,272
warrants to purchase common shares owned by the Officers.
A copy of
the Certificate of Designation is included as Exhibit 3.13 to this Current
Report on Form 8-K and is incorporated by reference herein.
Item
9.01. Financial Statements and Exhibits
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Exhibit
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Description
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Certificate
of Withdrawal of Certificate of Designation of Series A Cumulative
Convertible Preferred Stock filed July 18, 2008.
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Certificate
of Designation of Series B Preferred Stock filed July 18,
2008.
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Securities
Purchase Agreement dated as of July 15, 2008, by and between Espre
Solutions, Inc., as issuer, and La Jolla Cove Investors,
Inc.
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Form
of 6% Senior Convertible Debenture.
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Form
of Secured Promissory Note.
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Form
of Stock Pledge Agreement.
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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.
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ESPRE
SOLUTIONS, INC.
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Dated:
July 22, 2008
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By:
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/s/ Peter Leighton
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Peter
Leighton, President
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