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
26, 2008
____________________________
DIGITALFX
INTERNATIONAL, INC.
(Exact
name of registrant as specified in charter)
Florida
(State
or
other Jurisdiction of Incorporation or Organization)
001-33667
(Commission
File Number)
|
|
65-0358792
(IRS
Employer Identification No.)
|
|
3035
East Patrick Lane
Suite
#9
Las
Vegas, NV 89120
(Address
of Principal Executive Offices and zip code)
|
|
702-938-9300
(Registrant’s
telephone
number,
including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of 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(b) under the Exchange Act (17 CFR
240.14a-12(b))
[
]
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))
Safe
Harbor Statement under the Private Securities Litigation Reform Act of
1995
Information
included in this Form 8-K may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). This information may involve known and unknown
risks, uncertainties and other factors which may cause DigitalFX International,
Inc.’s (the “Registrant,” “we,” “our” or “us”) actual results, performance or
achievements to be materially different from future results, performance or
achievements expressed or implied by any forward-looking statements.
Forward-looking statements, which involve assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,”
“intend” or “project” or the negative of these words or other variations on
these words or comparable terminology. Forward-looking statements are based
on
assumptions that may be incorrect, and there can be no assurance that any
projections or other expectations included in any forward-looking statements
will come to pass. Our actual results could differ materially from those
expressed or implied by the forward-looking statements as a result of various
factors. Except as required by applicable laws, we undertake no obligation
to
update publicly any forward-looking statements for any reason, even if new
information becomes available or other events occur in the future.
Item
2.03
Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant
Item
3.02
Unregistered
Sales of Equity Securities
On
March
25, 2008, the Registrant announced its entry into Amendment and Exchange
Agreements dated March 24, 2008 with each of the institutional investors (the
“Investors”) signatory to that certain Securities Purchase Agreement dated
November 29, 2007 (“Securities Purchase Agreement”), pursuant to which the
Registrant and each Investor agreed to restructure the financing consummated
under the Securities Purchase Agreement to reduce the amount of the financing
to
$3,000,000, with each Investor receiving repayment of its pro-rata share of
$4,000,000, through the exchange of existing notes for a combination of amended
and restated senior secured convertible notes (“Amended and Restated Notes”) and
an aggregate of 1,000,000 shares of Common Stock (the “Common Shares”), and
through the exchange of existing warrants for amended and restated warrants
(“Amended and Restated Warrants”). The transactions contemplated by the
Amendment and Exchange Agreements closed on March 26, 2008.
The
Amended and Restated Notes have a term of three years commencing from November
30, 2007, carry interest at 7.50% per annum on the unpaid/unconverted principal
balance, payable quarterly in cash, and are secured on a senior basis against
all of the assets of the Registrant. The Registrant is also required to make
aggregate monthly principal payments of $25,000, plus accrued interest thereon,
beginning July 1, 2008. The Amended and Restated Warrants have a term of five
years commencing from November 30, 2007 and will entitle the Investors to
initially purchase an aggregate of 750,002 shares of Common Stock (subject
to
adjustment as provided in the Amended and Restated Warrants, including pursuant
to economic anti-dilution adjustments).
The
Amended and Restated Notes convert to approximately 1,500,000 shares, based
on a
conversion price equal to $2.00 per share (subject to adjustment as provided
in
the Amended and Restated Notes, including pursuant to economic anti-dilution
adjustments), which shall reset on March 26, 2009 to the greater of (i) 105%
of
the arithmetic average of the dollar weighted average price of the Common Stock
over each of the five (5) consecutive trading days ending on the trading day
immediately prior to March 26, 2009 and (ii) $1.00 (as adjusted for any stock
splits, stock dividends, recapitalizations, combinations, reverse stock splits
or other similar events); provided however, that in no event shall the adjusted
conversion price be greater than $3.00 (as adjusted for any stock splits, stock
dividends, recapitalizations, combinations, reverse stock splits or other
similar events). The Amended and Restated Warrants have an exercise price of
$0.959 per share (subject to adjustment as provided in the Amended and Restated
Warrants, including pursuant to economic anti-dilution
adjustments).
The
Amended and Restated Notes are convertible at the option of the Investors prior
to their maturity. Additionally, beginning November 30, 2008, and provided
that
the Registrant has complied with certain equity conditions, the Registrant
will
be able to require the Investors to convert the Amended and Restated Notes
to
Common Stock if the dollar volume weighted average price of the Common Stock
is
$2.75 (as adjusted for any stock splits, stock dividends, recapitalizations,
combinations, reverse stock splits or other similar events) for twenty (20)
out
of thirty (30) consecutive trading days.
The
maturity date of the Amended and Restated Notes is November 30, 2010. The
Investors are entitled to accelerate the maturity in the event that there occurs
an event of default under the Amended and Restated Notes, including, without
limitation, if the Registrant fails to register for resale the Common Shares
and
the shares underlying the Amended and Restated Notes and Amended and Restated
Warrants, if the Registrant fails to pay any amount under the Amended and
Restated Notes when due, if a judgment is rendered against the Registrant in
an
amount set forth in the Amended and Restated Notes, if the Registrant breaches
any representation or warranty under the Securities Purchase Agreement, as
amended, or other transaction documents, or if the Registrant fails to comply
with the specified covenants set forth in the Amended and Restated Notes. Among
the other covenants, the Amended and Restated Notes contain financial covenants
whereby the Registrant will be required to achieve specified EBITDA (earnings
before interest, tax, depreciation and amortization) and revenue targets in
each
of the fiscal quarters during which the Amended and Restated Notes are
outstanding. Any failure by the Registrant to achieve an EBITDA or revenue
target will be considered a breach of the financial covenants.
In
connection with the closing, the Registration Rights Agreement dated November
30, 2007 (the “Registration Rights Agreement”) was amended to provide that the
Registrant must register for resale 100% of the sum (i) the aggregate number
of
shares of Common Stock issued or issuable upon conversion of the Amended and
Restated Notes as of the trading day immediately preceding the date the
registration statement is initially filed with the Securities and Exchange
Commission (the “SEC”), (ii) the aggregate number of shares of Common Stock
issued or issuable upon exercise of the Amended and Restated Warrants as of
the
trading day immediately preceding the date the registration statement is
initially filed with the SEC, and (iii) the Common Shares, and to remove
provisions related to payments to the Investors in connection with the
Registrant’s failure to effectuate a registration statement or maintain its
effectiveness.
In
addition, under the terms of the Amendment and Exchange Agreements, if a
registration statement is not available for the resale of the Common Shares
and
the shares of Common Stock underlying the Amended and Restated Notes and the
Amended and Restated Warrants and the Registrant fails to satisfy the current
public information requirement under Rule 144 promulgated under the Securities
Act, the Registrant has agreed to pay the Investors as a result of the event
and
for each month thereafter that such event continues (or until such time such
information is no longer required under the rule), an amount in cash as partial
liquidated damages equal to 1.5% of the aggregate purchase price paid by the
Investors for the shares underlying the Amended and Restated Notes and Amended
and Restated Warrants then held by Investors.
In
connection with the closing, the Registrant issued irrevocable instructions
to
its transfer agent to issue the Common Shares to the Investors. Under the terms
of the Amendment and Exchange Agreements, so long as the Amended and Restated
Notes are outstanding, each Investor is not permitted to sell a number of Common
Shares exceeding more than two-thirds (2/3) of the number of shares previously
issued, or required to have been issued, to such Investor upon conversion of
such Investor's Amended and Restated Notes.
The
net
proceeds of approximately $2.1 million, after the payment of aggregate
transaction expenses, will be used for strategic initiatives and general working
capital purposes.
At
the
closing, VM Investors, LLC, the Registrant’s majority shareholder (whose members
include Craig Ellins, the Registrant’s Chief Executive Officer, and Amy Black,
the President of the Registrant’s subsidiary, VMdirect, L.L.C.), entered into an
Amended and Restated Lock-Up Letter Agreement in favor of the Investors pursuant
to which VM Investors, LLC agreed not to offer, sell, pledge or otherwise
dispose of any shares of Common Stock of the Registrant
until
the date that none of the Amended and Restated Notes remain
outstanding
,
subject
to specified limited exceptions including the transfer of 1,000,000 shares
of
Common Stock to the Company in connection with the restructuring transaction.
Each of the Investors and the Registrant’s affiliates (including its officers
and directors) also agreed not to engage in any transactions in the Registrant’s
securities during the thirty (30) trading day period ending on the one-year
anniversary of the closing of the restructuring transaction.
The
issuance of the Amended and Restated Notes, the Common Shares and the Amended
and Restated Warrants, was intended to be exempt from registration under the
Securities Act pursuant to Section 3(a)(9) thereof, as such securities will
be
exchanged by the Registrant with existing security holders exclusively and
no
commission or other remuneration will be paid or given directly or indirectly
for soliciting such exchange. No registration statement covering these
securities has been filed with the SEC or with any state securities commission
in respect of the transactions contemplated by the Amendment and Exchange
Agreements.
The
transaction documents, including, the forms of Amendment and Exchange Agreement,
Amended and Restated Senior Secured Convertible Note and Amended and Restated
Warrant, were attached to the Registrant’s Current Report on Form 8-K (File No.
001-33667), filed with the SEC on March 25, 2008, as Exhibits 10.1, 10.2 and
10.3, respectively, and are incorporated herein by reference.
Section
9 - Financial Statements and Exhibits
Item
9.01 Financial Statements and Exhibits.
(a)
|
Financial
statements of business acquired
.
Not applicable.
|
(b)
|
Pro
forma financial information
.
Not applicable.
|
(c)
|
Shell
Company Transactions
.
Not applicable.
|
|
10.1
|
Form
of Amendment and Exchange Agreement
(1)
|
|
10.2
|
Form
of Amended and Restated Senior Secured Convertible Note
(1)
|
|
10.3
|
Form
of Amended and Restated Warrant (1)
|
(1)
Filed
as
an exhibit to the Registrant’s Current Report on Form 8-K (File No. 001-33667),
filed with the Securities and Exchange Commission on March 25,
2008.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, DigitalFX
International, Inc. has duly caused this report to be signed on its behalf
by
the undersigned hereunto duly authorized.
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DigitalFX
International, Inc.
|
|
|
|
Date:
April 1, 2008
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By:
|
/s/
Mickey Elfenbein
|
|
|
|
Mickey
Elfenbein
Chief
Operating Officer and Secretary
|
EXHIBIT
INDEX
Exhibit
Number
Description of Exhibit
|
10.1
|
Form
of Amendment and Exchange Agreement
(1)
|
|
10.2
|
Form
of Amended and Restated Senior Secured Convertible Note
(1)
|
|
10.3
|
Form
of Amended and Restated Warrant (1)
|
(1)
|
Filed
as an exhibit to the Registrant’s Current Report on Form 8-K (File No.
001-33667), filed with the Securities and Exchange Commission on
March 25,
2008.
|
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