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) August 31, 1998
SoftNet Systems, Inc.
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(Exact name of registrant as specified in charter)
New York 1-5270 11-1817252
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
520 Logue Avenue, Mountain View, CA 94043
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (650) 962-7470
N/A
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(Former name or former address, if changed since last report.)
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Item 5. Other Events
On August 31, 1998, Registrant issued 7,500 shares of Series C
Convertible Preferred Stock (the "Series C Preferred Stock") and warrants to
purchase 93,750 shares of Common Stock (the "Series C Warrants") through a
combined $7,500,000 private equity placement, and agreed to issue 7,500 shares
of Series D Convertible Preferred Stock (the "Series D Preferred Stock") and
warrants to purchase an additional 93,750 shares of Common Stock (the "Series D
Warrants") for an additional $7,500,000, subject to shareholder approval and
other conditions (though no assurance can be given that such closing condition
will be satisfied).
For the next nine months, the Series C Preferred Stock is
convertible into the Company's Common Stock at a conversion price of $9.00 per
share. Thereafter, the conversion price of the Preferred Stock may vary based
upon the trading price of the Common Stock during the period preceding
conversion. The Series C Warrants have an exercise price of $9.375 per share and
expire on August 31, 2002. Any Series C Preferred Stock outstanding on August
31, 2001 will either be redeemed at face value or converted into the Common
Stock, at the sole discretion of the Company. Conversion of the Series C
Preferred Stock is subject to the rules of the American Stock Exchange regarding
issuance of greater than 20% of a listed company's Common Stock without
shareholder approval.
The Series C Preferred Stock is entitled to dividends, at the
rate of 5% per annum, payable in cash or, at the Company's election, in
additional shares of Series C Preferred Stock. In certain circumstances,
including failure to list the Common Stock underlying the Preferred Stock and
Warrants on the American Stock Exchange or failure to register such Common Stock
for resale under the Securities Act of 1933, as amended, the Company is subject
to certain penalties. At the Company's option, the Series C Preferred Stock may
be redeemed upon the earlier to occur of (i) a Qualified Offering (as defined in
the Company's Restated Certificate of Incorporation) or (ii) February 28, 2000.
In the event such redemption is made prior to September 1, 1999, then the
redemption price will be 110% of the stated value of the Series C Preferred
Stock. Thereafter, the redemption price is 120% of the stated value of the
Series C Preferred Stock. The Series C Warrants contain certain call and
anti-dilution provisions and permit cashless exercise.
The Series D Preferred Stock and Series D Warrants have
similar provisions as the Series C Preferred Stock and the Series C Warrants.
The conversion price of the Series D Preferred Stock and the exercise price of
the Series D Warrants will be at a 20% premium of the market price of the Common
Stock prior to their issuance.
The financing was arranged by Shoreline Pacific Institutional
Finance, the Institutional Division of Financial West Group ("Shoreline"). Upon
the closing of the Series C transactions, Shoreline received a fee of $375,000
plus warrants, having an exercise price of $7.50 per share to purchase an
aggregate 52,500 shares of the Common Stock (the "Shoreline Warrants"). Half of
the Shoreline Warrants are immediately exercisable and expire on August 31,
2002. The other half of the Shoreline Warrants are exercisable upon the issuance
of the Series D Preferred Stock and expire on the fourth anniversary of such
issuance. In the event the Series D Preferred Stock is not issued prior to
September 1, 1999, the second half of the Shoreline Warrants will expire.
Shoreline is entitled to receive an additional $375,000 upon the closing of the
Series D transactions.
The press release announcing this offering inadvertently
states that the exercise price of the Series C Warrants is 120% of the closing
Common Stock bid price. The correct percentage is 125%. In addition, the
conversion price of the Series C Preferred Stock is 120% of the closing Common
Stock bid price, as opposed to 120% of the closing price as stated in the press
release.
Item 7. Exhibits
Exhibit No. Description
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5.1 8/31/98 Press Release
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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.
SoftNet Systems, Inc.
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(Registrant)
Date: September 14, 1998 By: /s/ Garrett J. Girvan
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Garrett J. Girvan
Chief Operating Officer
and Chief Financial Officer
By: /s/ Mark A. Phillips
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Mark A. Phillips
Treasurer and
Chief Accounting Officer
<PAGE>
SoftNet Systems, Inc.
Exhibit Index
to Form 8-K
Exhibit No. Description
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5.1 8/31/98 Press Release
EXHIBIT 5.1
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SoftNet Systems, Inc.
520 Logue Avenue NEWS RELEASE
Mountain View, CA 94043-4094 Investors Contact: Mark Phillips
Treasurer
(650) 962-7474
SOFTNET SYSTEMS CONTINUES TO EXPAND ISP CHANNEL THROUGH
AGREEMENT FOR $15 MILLION PRIVATE EQUITY PLACEMENT
Mountain View, CA (August 31, 1998) -- SoftNet Systems, Inc. (AMEX:
SOF), announced that it has agreed to a private equity placement of $15 million
to expand the ISP Channel. The agreement consists of two $7.5 million draws to a
single existing institutional investor.
The Company closed the first draw today with the issuance of $7.5
million face value of Series C Convertible Preferred Stock, together with
warrants to purchase 93,750 shares of the Company's common stock at 120% of
today's closing common stock bid for combined proceeds of $7.5 million in cash.
The Series C Convertible Preferred Stock will be convertible into the
Company's common stock for up to four years at 120% of the closing price of
SoftNet's common stock today. An additional $7.5 million has been committed by
the same institutional investor in exchange for $7.5 million face value of
Series D Convertible Preferred Stock, together with warrants to purchase an
additional 93,750 shares of the Company's common stock, to be issued upon
shareholder approval, certain increases in the Company's stock price and the
satisfaction of certain other closing conditions (though no assurance can be
given that such closing conditions will be satisfied).
This Series D Convertible Preferred stock will initially be convertible
into shares of the Company's common stock at a 20% premium to the market price
of the Common Stock prior to issuance.
<PAGE>
Each series pays a 5% dividend, payable in cash or additional preferred
stock, at the Company's option. Each series also becomes convertible immediately
upon issuance and allows an adjustment to the conversion rate nine months after
issuance.
The financing was arranged by Shoreline Pacific Institutional Finance,
the Institutional Division of Financial West Group of Sausalito, California.
The proceeds from this offering will be used primarily to expand its
the ISP Channel, the company's Internet services business, and for general
corporate purposes.
The ISP Channel offers an end-to-end high speed Internet over cable
access system. The Company provides cable operators a nationwide turnkey service
so they can rapidly enter the high speed Internet access business with little
capital. Packaging its service offering like a cable television programming
network, the ISP Channel absorbs key capital and operating costs related to
deployment of Internet in exchange for a revenue sharing agreement.
The ISP Channel's comprehensive services include headend equipment and
integration, Internet backbone connectivity, co-branded Internet Explorer and
Netscape software, and co-branded local and national content from Excite. ISP
Channel subscribers receive broadband access at speeds many times faster than
dial-up at comparable prices. Additional services include e-mail, Web access,
news, and full audio and video collaborative services as part of ISP Channel's
standard offering.
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SoftNet's Internet Division provides comprehensive business-to-business Internet
Services including Internet access and Web development along with the "ISP
Channel" branded program for cable operators. News and information are available
at www.ispchannel.com. The Imaging Division develops, markets, installs and
services electronic information and document management systems that allow
customers to electronically request and receive information from multiple media.
The Company's Telecom Division markets and installs telecom and datacom
solutions.
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