form8k.htm
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
5, 2008
_____________________________
Blue Holdings,
Inc.
(Exact
name of registrant as specified in charter)
Nevada
(State or
other Jurisdiction of Incorporation or Organization)
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000-33297
(Commission
File Number)
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88-0450923
(IRS
Employer Identification No.)
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5804
E. Slauson Ave., Commerce, CA 90040
(Address
of Principal Executive Offices and zip code)
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(323)
725-5555
(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 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(b) 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))
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Item
1.01
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Entry
into a Material Definitive
Agreement
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Item
2.03
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant
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Item
3.02
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Unregistered
Sales of Equity Securities
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On March
5, the Registrant entered into a Securities Purchase Agreement (the “Securities
Purchase Agreement”) with Gemini Master Fund, Ltd. (the “Investor”) pursuant to
which the Registrant issued an aggregate of $2.0 million of thirty-month senior
secured convertible notes, and five-year warrants to purchase an aggregate of
875,000 shares, to the Investor. Pursuant to the terms of the
Securities Purchase Agreement, the Registrant may issue additional convertible
notes in the aggregate principal amount of up to $1,000,000 and additional
warrants to purchase up to an aggregate of 437,500 shares of common
stock.
The
convertible notes carry interest at 8% per annum on the unpaid/unconverted
principal balance, and are secured on a second priority basis against all of the
assets of the Registrant. One-twenty-fourth of the principal amount
of the convertible notes, and accrued but unpaid interest, are due and payable
monthly in 24 installments beginning on first day of each calendar month,
commencing on the first day of the first full calendar month occurring after the
date which is six months following the original issue date. These
installment payments can be made in cash or through the issuance of stock
provided that certain equity conditions (as further set forth in the convertible
notes) are met. The convertible notes are convertible into
approximately 2,500,000 shares of common stock, based on a conversion price
equal to $0.80 per share. The additional convertible notes issuable
pursuant to the terms of the Securities Purchase Agreement would be convertible
into an aggregate maximum of an additional 1,250,000 shares of common stock
based on a conversion price of $0.80 per share.
The
convertible notes include customary anti-dilution provisions. While
the convertible notes are outstanding, if the Registrant issues or sells, or is
deemed to have issued or sold, any shares of common stock (other than certain
excluded issuances) for a consideration per share less than the per share
conversion price in effect immediately prior to such issuance or sale, then
immediately after such issuance or sale the per share conversion price then in
effect pursuant to the convertible notes shall be reduced to the issuance price
per share of such newly issued or sold securities.
The
convertible notes are convertible at the option of the Investor prior to their
maturity. Additionally, beginning twelve (12) months after their
issuance, the Registrant can require the Investor to convert the convertible
notes to common stock if the volume-weighted average price (as determined
pursuant to the convertible notes) of the common stock for any 20 out of 30
consecutive trading days exceeds $1.60 and certain equity conditions (as further
set forth in the convertible notes) are met.
The
maturity date of the convertible notes is September 1, 2010. At any
time after six months following the original issue date, and provided that
certain equity conditions (as further set forth in the convertible notes) are
met, the Registrant may redeem the convertible notes for cash in an amount equal
to the sum of (i) 120% of the then outstanding principal amount of the
convertible notes, (ii) all accrued but unpaid interest thereon, and (iii) all
liquidated damages and other amounts due in respect of the convertible
notes.
The
Investor will be entitled to accelerate the maturity of the convertible notes in
the event that there occurs an event a default under the convertible notes,
including, without limitation, if the Registrant fails to pay any amount under
the convertible notes when due, if a judgment is rendered against the Registrant
in an amount set forth in the convertible notes, if the Registrant breaches any
representation or warranty under the Securities Purchase Agreement or other
transaction documents, or if the Registrant fails to comply with the specified
covenants set forth in the convertible notes.
The
warrants have an exercise price of $1.00 per share. The warrants
include customary anti-dilution provisions. While the warrants are
outstanding, if the Registrant issues or sells, or is deemed to have issued or
sold, any shares of common stock (other than certain excluded issuances) for a
consideration per share less than the per share exercise price in effect
immediately prior to such issuance or sale, then immediately after such issuance
or sale the per share exercise price shall be reduced to an amount determined by
multiplying the exercise price then in effect by a fraction (a) the numerator of
which shall be the sum of (1) the number of shares of common stock outstanding
immediately prior to such issue or sale, plus (2) the number of shares of common
stock which the aggregate consideration received by the Registrant for such
additional shares would purchase at such exercise price, and (b) the denominator
of which shall be the number of shares of common stock outstanding immediately
after such issue or sale, and the number of shares issuable upon exercise of the
warrant shall be increased such that the aggregate exercise price payable
hereunder, after taking into account the decrease in the exercise price, shall
be equal to the aggregate exercise price prior to such adjustment.
The
convertible notes and warrants provide that if the Registrant has not obtained
shareholder approval, the Registrant may not issue, upon conversion or exercise
of the convertible notes and warrants, as applicable, a number of shares of
common stock which, when aggregated with any shares of common stock issued on or
after March 5, 2008 and prior to expiration of the warrants and the maturity of
the convertible notes (A) in connection with the conversion of any convertible
notes issued pursuant to the Securities Purchase Agreement or as payment of
principal, interest or liquidated damages, (B) in connection with the exercise
of any warrants issued pursuant to the Securities Purchase Agreement, and (C) in
connection with any warrants issued to any registered broker-dealer as a fee in
connection with the issuance of the securities pursuant to the Securities
Purchase Agreement, would exceed 19.99% of the number of shares of Common Stock
outstanding on March 4, 2008.
On March
5, 2008, the Registrant obtained the written consent of holders of a majority of
the outstanding shares of the Registrant’s capital stock to the transactions
contemplated under the Securities Purchase Agreement and intends to file an
information statement to effectuate the actions approved therein in the
immediate future.
In
connection with the transactions contemplated by the Securities Purchase
Agreement, the Registrant’s majority shareholders, Paul Guez (the Registrant’s
Chairman of the Board of Directors) and Elizabeth Guez, each entered into a
Lock-Up Letter Agreement pursuant to which they agreed not to offer, sell,
pledge or otherwise dispose of any shares of common stock of the Registrant for
a 6-month period following the closing and at all times thereafter during which
the Registrant has not been subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act for the then preceding 90 days or has failed to
file all reports required for the preceding 12 months, subject to specified
limited exceptions.
Also in
connection with the transactions contemplated by the Securities Purchase
Agreement, the Registrant was required to pay its previously engaged placement
agent an aggregate fee equal to 6% of the gross proceeds from the sale of the
convertible note and warrant, 72% of which fee is payable through the issuance
of a convertible note, and was required to issue a warrant to purchase 150,000
shares of common stock, at an exercise price equal to $1.00. On March
5, 2008, the Registrant paid the placement agent a cash fee of $33,600, and
issued to the placement agent a convertible note in the aggregate principal
amount of $86,400 and a warrant (with the same terms as the warrants issued to
the Investor) to purchase 150,000 shares of Common Stock. The
convertible note issued to the placement agent is convertible into 108,000
shares of common Stock at a per share price of $0.80, and has the same terms as
the convertible notes issued to the Investor.
The net
proceeds of approximately $1.964 million, after placement agent fees and
transaction expenses, will be used for strategic initiatives and general working
capital purposes.
The
transaction documents, including, the Securities Purchase Agreement, the 8%
Senior Secured Convertible Note, Warrant, form of Lock-Up Agreement, Security
Agreement, IP Security Agreement and Subsidiary Guarantee, are attached hereto
as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, and 10.7, respectively, and are
incorporated herein by reference.
On March
5, 2008, the Registrant also entered into a Common Stock Purchase Agreement with
Paul Guez pursuant to which the Registrant agreed to issue 1,750,000 shares of
Common Stock in consideration of the cancellation of $1,400,000 of advances made
to the Registrant by Mr. Guez, at a per share price of $0.80. The
Common Stock Purchase Agreement is attached hereto as Exhibit 10.8 and is
incorporated by reference.
The
issuance of the convertible notes and warrants, the shares underlying the
convertible notes and warrants, and the shares upon the cancellation of
outstanding indebtedness was intended to be exempt from registration under the
Securities Act pursuant to Section 4(2) thereof and Rule 506 of Regulation D
(“Regulation D”) as promulgated by the SEC under the Securities Act, as such
securities will be issued to accredited investors and were not originated
through any general solicitation or advertisement. The securities to
be issued may not be offered or sold in the United States unless they are
registered under the Securities Act, or an exemption from the registration
requirements of the Securities Act is available. 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
Securities Purchase Agreement and the Common Stock Purchase
Agreement.
On March
6, 2008, the Registrant issued a press release announcing its entry into the
Securities Purchase Agreement, which release is furnished herewith as Exhibit
99.1.
Section
9 - Financial Statements and Exhibits
Item
9.01 Financial Statements and Exhibits.
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(a)
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Financial statements
of business acquired. Not
applicable.
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(b)
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Pro forma financial
information. Not
applicable.
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(c)
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Shell Company
Transactions. Not
applicable.
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10.1
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Securities
Purchase Agreement dated March 5, 2008, by and between the Registrant and
the purchasers signatory thereto.
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10.2
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8%
Senior Secured Convertible Note
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10.4
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Form
of Lock-Up Agreement
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10.6
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IP
Security Agreement
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10.7
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Subsidiary
Guarantee
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10.8
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Common
Stock Purchase Agreement dated March 5, 2008, by and between the
Registrant and Paul Guez.
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99.1
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Press
Release issued by the Registrant on March 6,
2008.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, Blue Holdings, Inc.
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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Date: March
7, 2008
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By:
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/s/ Larry Jacobs |
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Larry
Jacobs, Chief Financial Officer
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Exhibit Number
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Description of Exhibit
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Securities
Purchase Agreement dated March 5, 2008, by and between the Registrant and
the purchasers signatory thereto.
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8%
Senior Secured Convertible Note
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Warrant
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Form
of Lock-Up Agreement
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Security
Agreement
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IP
Security Agreement
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Subsidiary
Guarantee
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Common
Stock Purchase Agreement dated March 5, 2008, by and between the
Registrant and Paul Guez.
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Press
Release issued by the Registrant on March 6,
2008.
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