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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 AND
EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 19, 1998
HELPMATE ROBOTICS INC.
(Exact name of registrant as specified in its charter)
CONNECTICUT 1-14160 06-1110906
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or organization) Identification No.)
SHELTER ROCK LANE
DANBURY, CONNECTICUT 06801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 798-8988
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Item 5. Other Events.
HelpMate Robotics Inc. today announced a series of steps directed at
improving the Company's short-term liquidity and cash flow issues, including
the completion of a private placement of convertible notes, the agreement by
certain creditors to accept reduced cash payment in liquidation of
outstanding trade payables, and the agreement by certain creditors to convert
their loans, trade payables, and other obligations of the Company to them
into shares of common stock and warrants to purchase common stock. Each of
those transactions is described below.
Background. During the second half of 1997, the Company's financial
condition deteriorated and the Company experienced severe cash shortages.
The Company defaulted on loan payments to Connecticut Innovations
Incorporated ("CII") and to the Company's Chairman, Joseph F. Engelberger.
As of January 31, 1998, the outstanding principal and interest due under
these loans, respectively, were $454,545 and $171,862. Additionally, Leasing
Technologies International Inc. ("LTI") notified the Company in August 1997
that the Company was in default under the terms of its Master Lease
Agreement. The Company was also served an eviction notice by its landlord
due to non-payment of rent. As of November 13, 1997, past due accounts
payable were approximately $1.1 million. The Company was also delisted by the
Philadelphia Stock Exchange and NASDAQ Small Cap Market tier of the NASDAQ
Stock Market as a result of the Company's inability to meet the applicable
stock price and net worth requirements.
In light of the foregoing, the Company's management developed and
implemented a plan which resulted in significant actions being taken to
reduce expenses and to work out accommodations with creditors and lenders
while seeking alternative sources of capital. Management believed that if
accommodations could be made with creditors and lenders, then the Company
could operate in a downsized configuration, funded with the revenue streams
generated by the current and future rentals and sales of its HelpMate robots
while the Company pursued alternatives for addressing the long-term growth
capital needs of the business.
Accordingly, a substantial downsizing of the Company was accomplished in
the third quarter of fiscal 1997. The staff was reduced from 40 employees
(35 full-time, 5 part-time) to 12 full-time and 2 part-time employees. The
Vice President of Engineering and the Vice President of Sales and Marketing
resigned and the remaining senior management of the Company took significant
reductions in pay. Staff reductions were made in all departments, including
sales and marketing, engineering, manufacturing and administration. The
remaining staff was dedicated to support of the existing base of robots in
the field at customer sites. The Company also continued to build and install
robots at a reduced rate to fill orders from its existing backlog production,
using materials and parts which had been previously ordered. No new
materials for robots were ordered. Sales and marketing activities for
generating new customer orders were reduced to responding to inquiries as
received and no industry trade shows were attended. To further reduce costs,
the Company relocated to smaller office space.
Recent Transactions. During December 1997 and January 1998, the Company
completed negotiations with respect to the settlement of debt and trade
payables with its creditors in exchange for stock and/or reduced payments as
described below. The Company also reached agreement with the landlord to
forestall eviction and has negotiated a new three year lease for the reduced
space which the Company currently occupies. The Company also resolved its
default issues with LTI. Staff has been increased slightly to 15, including
the rehiring of a sales manager and management salary levels have been
reinstated. To further reduce costs, the Company changed its outside
auditors to Arthur Anderson LLP.
As of the date hereof, the Company is operating at slightly below cash
break-even level and management believes that at the Company's current level
of operations, it will have sufficient cash to maintain operations throughout
1998 and to complete the installation of robots from its then remaining
backlog of orders. The foregoing sentence is a forward looking statement made
on a good faith basis. Actual results may differ materially from forward
looking statement for reasons including, but not limited to, changes in the
health care industry, mix of robot rentals versus sales, the Company's
ability to continue to generate cash flow from operations, the Company's
ability to fulfill a portion of its backlog and withstand any resulting
effects of nonfulfillment, the approval by the Company's stockholders of an
amendment to the Company's certificate of incorporation increasing the number
of authorized shares of Common Stock to 40,000,000 and the acceptance for
filing by the Connecticut Secretary of the State of the Certificate effecting
such amendment (the "Amendment Effectiveness"), and the consummation of the
other transactions described below.
Further, as a result of the above described efforts, the Company has
entered into the following financing transactions.
Private Placement of Investor Units. In February 1998, the Company
concluded a private placement ("Private Placement") of $1,350,000 of units
("Investor Units"). Each Investor Unit consisted of a Promissory Note ("Unit
Note") and a Warrant ("Unit Warrant"). Each Unit Note is in the principal
amount of $100,000 and bears interest at a rate of seven percent (7.00%) per
annum payable quarterly and comes due on October 1, 1998. Each Unit Note is
convertible into 303,030 shares of Common Stock ("Unit Note Shares") at a
rate of one (1) share of Common Stock for each $.33 of principal indebtedness
outstanding under the Unit Note. Each Unit Warrant will be immediately
exercisable for 100,000 shares of Common Stock ("Unit Warrant Shares") at an
exercise price of $.33 per share. All of the Unit Notes will be converted
into an aggregate of 4,090,909 Unit Note Shares. All of the Unit Warrants
are
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exercisable for an aggregate of 1,350,000 Unit Warrant Shares. By their
terms, however, the Unit Notes will not be converted into Unit Note Shares
and the Unit Warrants will not be effective nor exercisable for Unit Warrant
Shares unless and until the Amendment Effectiveness occurs.
Conversion of Engelberger Loans. In November 1997, the Company's
Chairman, Joseph F. Engelberger, (and a foundation established by Mr.
Engelberger), made a demand loan to the Company in the amount of $150,000.
Mr. Engelberger is the Company's co-founder, its Chairman, and a director.
In exchange for that loan, the Company issued two demand notes bearing
interest at a rate of fifteen percent (15%) per annum (collectively the "1997
Engelberger Note"). In consideration for this loan, in January 1998, the
Company issued to Mr. Engelberger warrants expiring December 31, 2001 ("First
Engelberger Warrants") to purchase 25,000 shares of Common Stock at an
exercise price of $.33 per share. In January 1998, the 1997 Engelberger Note
was converted into 467,424 shares of the Company's Common Stock at a rate of
one share of Common Stock for every $.33 of principal and interest
outstanding under the 1997 Engelberger Note. In consideration of Mr.
Engelberger's agreement to convert the 1997 Engelberger Note, the Company
issued to Mr. Engelberger warrants expiring December 31, 2001 ("Additional
Engelberger Warrants") to purchase 154,250 shares of Common Stock at an
exercise price of $.33 per share.
The Company is also indebted to Mr. Engelberger pursuant to a term note
dated May 26, 1995 bearing interest at a rate of 10% per annum ("1995
Engelberger Note"). The 1995 Engelberger Note required payments of interest
only for one year, and then equal payments of principal and interest for 48
months, through June, 2000. In January 1998, the Company and Mr. Engelberger
agreed to convert the 1995 Engelberger Note into Shares of the Company's
Common Stock ("Engelberger Shares") so that the outstanding indebtedness
thereunder will be liquidated at the rate of one share of Common Stock for
each $.33 of indebtedness liquidated. In addition, the Company has agreed to
issue to Mr. Engelberger warrants expiring December 31, 2001 ("Second
Engelberger Warrants") exercisable for shares of Common Stock at an exercise
price of $.33 per share for each dollar of indebtedness liquidated. The
number of Engelberger Shares and Second Engelberger Warrants to be issued in
exchange for the liquidation of this indebtedness will be determined as of
the date of conversion based upon the outstanding balance under the Second
Engelberger Note. By way of illustration, if the Second Engelberger Note
were to have been liquidated as of January 31, 1998, Mr. Engelberger would
have been entitled to receive an aggregate of 520,794 Engelberger Shares and
Second Engelberger Warrants to purchase an aggregate of 171,862 shares in
exchange for the liquidation of $171,862 of principal and interest
outstanding as of that date.
The 1995 Engelberger Note will not be converted, the Engelberger Shares
will not be issued, and by their terms the First Engelberger Warrants, the
Additional Engelberger Warrants, and the Second Engelberger Warrants will not
be effective nor exercisable for shares of the Company's Common Stock
("Engelberger Warrant Shares") unless and until the Amendment Effectiveness
occurs.
Partial Repayment of Brookehill Loan. In November, 1997, Brookehill
Equities, Inc. ("Brookehill") made a demand loan to the Company in the amount
of $150,000, as evidenced by a note bearing interest at a rate of fifteen
percent (15%) per annum ("Brookehill Note"). In January 1998, the Company
repaid $75,000 of this loan. In consideration of this loan, in January 1998,
the Company issued to Brookehill warrants expiring December 31, 2001
("Brookehill Warrants") to purchase 25,000 shares ("Brookehill Warrant
Shares") of Common Stock at an exercise price of $.33 per share. By their
terms, the Brookehill Warrants will not be effective nor exercisable for the
Brookehill Warrant Shares unless and until the Amendment Effectiveness occurs.
Conversion of Sweeny Loan. In July 1997, the Company's President and
director, Thomas K. Sweeny, made a demand loan to the Company in the amount
of $60,000 evidenced by a note bearing interest at a rate of eight and
one-half percent (8.5%) per annum. In January 1998, that note was converted
into 189,845 shares of the Company's Common Stock at a rate of one share of
Common Stock for every $.33 of principal and interest outstanding thereunder.
In consideration of Mr. Sweeny's agreement to convert that note, the Company
issued to Mr. Sweeny warrants expiring December 31, 2001 ("Sweeny Warrants")
to purchase 62,649 shares ("Sweeny Warrant Shares") of Common Stock at an
exercise price of $.33 per share. By their terms, the Sweeny Warrants will
not be effective nor exercisable for shares of the Sweeny Warrant Shares
unless and until the Amendment Effectiveness occurs.
Conversion of Certain Trade Payables. In December 1997 and January 1998,
the Company entered into agreements with certain of its creditors pursuant to
which each of those
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creditors agreed to liquidate the Company's payables to such creditor in
exchange for shares of the Company's stock ("Creditor Shares") and warrants
to purchase the Company's stock ("Creditor Warrants"). The Creditor Shares
will be issued at the rate of one Creditor Share for each $.33 of
indebtedness liquidated. The Creditor Warrants will be issued at the rate of
one Creditor Warrant per dollar of indebtedness liquidated and will be
exercisable for shares of Common Stock ("Creditor Warrant Shares") The
Company proposes to issue to the creditors an aggregate of 468,958 Creditor
Shares and Creditor Warrants to purchase an aggregate of 154,756 Creditor
Warrant Shares in exchange for the liquidation of $154,756 of payables. The
Creditor Shares and Creditor Warrants will not be issued, and by their terms,
the Creditor Warrants will not be effective nor exercisable for the Creditor
Warrant Shares unless and until the Amendment Effectiveness occurs.
Liquidation of Certain Trade Payables. In December 1997 and January
1998, the Company completed transactions with other certain other of its
creditors pursuant to which each of those creditors agreed to liquidate the
Company's payables to such creditor in exchange an immediate cash payment of
a portion of the payable. The Company used approximately $515,000 of the
Private Placement proceeds to make these payments and, as a result,
liquidated approximately $850,000 of the $1.1 million of past due payables
outstanding as of November 13, 1997.
Boston Group Shares. In consideration for its services to the Company
in connection with the Private Placement, the Boston Group, LP will be issued
a warrant expiring December 31, 2001 ("Boston Group Warrant") immediately
exercisable to purchase up to approximately 2,379,000 shares of Common Stock
("Boston Group Warrant Shares") at an exercise price of $.33 per Boston Group
Warrant Share. The number of Boston Group Warrant Shares will be determined
as of the date the Amendment Effectiveness occurs and will be based upon,
among other things, the gross proceeds of the Private Placement, and the
dollar amount of payables and other creditor payments liquidated, including
those to Messrs. Engelberger and Sweeny and to CII described herein. By its
terms, the Boston Group Warrant will not be effective nor exercisable for the
Boston Group Warrant Shares unless and until the Amendment Effectiveness
occurs. In addition to the Boston Group Warrant, the Company also paid the
Boston Group, LP commissions and a non-accountable expense allowance in
connection with the Private Placement in the amount of $189,000.
Conversion of Certain Obligations to CII. In January 1998, the Company
reached an agreement in principle with CII, a security-holder and creditor of
the Company, pursuant to which CII has agreed to convert the Company's loan
indebtedness and certain accrued royalty payments to CII into shares of
Common Stock and warrants to purchase Common Stock, and to accept shares of
Common Stock and warrants in lieu of certain royalty payments which may come
due during the calendar year 1998.
CII Loan Obligations. The Company's loan indebtedness to CII is
evidenced by a note dated June 14, 1995 ("CII Note") bearing interest at a
rate of 10% per annum. The CII Note requires payments of interest only for
one year, and then equal payments of principal and interest for 48 months,
through June, 2000, and is secured by a security interest in all of the
Company's intellectual property relating the HelpMate in the North and South
American markets. As of January 31, 1998, the outstanding principal and
interest due under the CII Loan was $454,545. Under the CII loan agreements,
the Company is also required, among other things, to retain its principal
place of business and a majority of its employees and operations in the State
of Connecticut ("Connecticut Presence Requirements") until June, 2001.
CII Royalty Obligations. The Company also has certain royalty
obligations to CII under a Development Agreement dated December 29, 1986,
pursuant to which CII reimbursed the Company for certain development costs
related to the HelpMate robotics courier system ("Sponsored Products").
Under the Development Agreement, the Company must pay royalties to CII equal
to (i) a specified percentage ("Company Percentage Rate") of the Company's
net sales of Sponsored Products, (ii) fifty percent of license fees paid to
the Company under licenses granting to third parties the rights to produce
or sell the Sponsored Products, and (iii) fifty percent of any royalties
received by the Company on net sales of Sponsored Products by third-party
licensees of the Company. During the two-year period ending February 1998
("Reduced Royalty Term"), the Company Percentage Rate was equal to the
greater of (i) one and one-half percent of the net sales of Sponsored
Products or (ii) twenty percent (20%) of the Company's pre-tax profits (but
in no event more than five percent of net sales of Sponsored Products).
After February 1998, the Company Percentage Rate increases to five percent of
the Company's net sales of Sponsored Products. Subject to the satisfaction
of certain conditions, at the expiration of the Reduced Royalty Term, the
Company will be credited with an additional $300,000 in royalty payments
against the Royalty Threshold described below. The Company must pay
royalties at the rate described above until the total royalties paid or
credited have aggregated $2,205,000 ("Royalty Threshold"). Once royalties
paid or credited have reached the Royalty Threshold, the Company must
thereafter pay royalties for a period equal to the period of time taken to
reach the Royalty Threshold except that the Company Percentage Rate during
that period would be reduced to one-half of one percent. Royalties payable
only to the extent that sales and license fees are realized. Through
December 31, 1997, the Company has paid approximately $265,000 in royalties
to CII.
CII Agreement in Principle. CII has agreed to convert the outstanding
indebtedness under the CII Note and royalty payments accrued under the
Development Agreement through December 31, 1997 into shares of the Company's
Common Stock and such amounts will be liquidated at the rate of one share of
Common Stock for each $.33 of indebtedness and royalty liquidated. In
addition, the Company will issue to CII warrants expiring December 31, 2001
("CII Warrants") exercisable for shares of Common Stock at an exercise price
of $.33 per CII Warrant Share for each dollar of indebtedness and royalty
liquidated. The number of CII Shares and CII Warrants to be issued will be
determined as of the date of conversion. By way of illustration, if the CII
Note and the December 31, 1997 accrued royalty were to be so liquidated as of
January 31, 1998, CII would have been entitled to receive an aggregate of
1,447,591 CII Shares and CII Warrants to purchase an aggregate of 477,705
shares of Common Stock. In lieu of cash payments of the royalties accruing
during the fiscal year ending December 31, 1998, CII has also agreed to
accept one share of Common Stock ("CII Royalty Shares") for each $.33 of
royalties required to be paid
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and warrants expiring December 31, 2001 ("CII Royalty Warrants") to purchase
one share of Common Stock at an exercise price of $.33 per share for each
dollar of royalties required to be paid.
As part of its agreement with CII the Company must agree to extend the
Connecticut Presence Requirements to a term ending ten years from the date of
closing. In the event the Company violates the Connecticut Presence
Requirements, CII can (a) demand immediate payment of the balance of the
Royalty Threshold; and (b) require the Company to repurchase its Company
Securities. The security interest previously granted to CII in the
intellectual property relating to HelpMate in the North and South American
markets will be extended so that it also secures the Company's obligations to
make the royalty payments under the Development Agreement. In addition, a
representative of CII would continue to have the right to attend meetings of
the Company's board of directors so long as CII owns shares of the Company's
stock and the Company has any outstanding obligations under the Development
Agreement.
The CII Shares and the CII Royalty Shares will not be issued, and by
their terms, the CII Warrants and CII Royalty Warrants will not be effective
nor exercisable for shares of the Company's Common Stock (the "CII Warrant
Shares") unless and until the Amendment Effectiveness occurs.
Registration Rights. None of the securities issued in the transactions
above may be resold to the public unless they are registered under the
Securities Act of 1933, as amended or unless an exemption from such
registration is available. Upon the Amendment Effectiveness, the Company has
agreed to use its diligent efforts to register the Unit Warrants, the Unit
Note Shares, the Unit Warrant Shares the Boston Group Shares and the Boston
Group Warrants and the Boston Group Warrant Shares for public sale thirty
(30) days after the closing of the issuance of the Creditor Shares.
Amendment to Certificate of Incorporation. The Company does not have
sufficient shares available to provide for the issuance of the Unit Note
Shares, Unit Warrant Shares, Engelberger Note Shares, Engelberger Warrant
Shares, Sweeny Warrant Shares, Creditor Shares, Creditor Warrant Shares, CII
Shares, CII Royalty Shares, CII Warrant Shares and the Boston Group Warrant
Shares (collectively, the "Contingent Shares") and the Company agreed to seek
the approval of the Company's stockholders of an amendment to the Company's
Certificate of Incorporation to provide additional authorized shares for
issuance of the Contingent Shares.
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, thereunto duly authorized.
HelpMate Robotics Inc.
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(Registrant)
Date: January 26, 1998 /s/ Thomas K. Sweeny
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Thomas K. Sweeny
President, and Chief Executive Officer,
Director, Treasurer and PRINCIPAL
FINANCIAL OFFICER
