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): January 22, 2010
FONIX
CORPORATION
(Exact
name of registrant as specified in its Charter)
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Delaware
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0-23862
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22-2994719
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(State
or other jurisdiction
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(Commission
File Number)
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(IRS
Employer
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of
incorporation)
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Identification
No.)
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387
South 520 West, Suite 110, Lindon, Utah
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84042
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
Telephone Number, Including Area Code: (801) 553-6600
Item
8.01 Other
Events
Fonix Corporation Tenders
Notice of Default under G-Soft Exchange Agreement; Failure of Notice Recipients
to Meet January 22, 2010, Deadline.
On January 13, 2010, Fonix Corporation
(the “Company”) issued a formal notice (the “Notice”) of breach of the Exchange
Agreement (the “Exchange Agreement”) among the Company, Fonix GS Acquisition
Corporation, Inc. (“Fonix GS”), Southridge LLC, a Connecticut limited liability
company (“Southridge”), G-Soft Limited, a Hong Kong corporation (“G-Soft”) and
the shareholders of G-Soft (the “Sellers”). The Notice gave the
Sellers until January 22, 2010, to cure certain defaults under the Exchange
Agreement, and until January 29, 2010, to cure certain other defaults, both
discussed more fully below. The Sellers failed to meet the January
22, 2010, deadline.
Exchange Agreement
By way of background, on June 27, 2008,
the Company and Fonix GS entered into the Exchange Agreement with Southridge;
G-Soft, which is the ultimate parent of Shanghai Gaozhi Software Systems Limited
(“GaozhiSoft”); and the Sellers. G-Soft, through its wholly owned
subsidiary, owned 100% of the outstanding equity of GaozhiSoft. Pursuant to the
Exchange Agreement, Fonix GS agreed to purchase 80% of the issued and
outstanding shares of G-Soft from the Sellers, and Southridge agreed to purchase
the remaining 20% of the issued and outstanding G-Soft shares, thereby making
Fonix GS and Southridge the ultimate shareholders of GaozhiSoft.
The Exchange Agreement was amended by
the First Amendment to the Exchange Agreement, dated as of December 12, 2008
(the “First Amendment”), modifying the consideration for the purchase of the
G-Soft shares and certain other closing conditions, as set forth
therein. Additionally, subject to the terms of the First Amendment,
the Sellers were entitled to annual earn-out payments equal to fifty percent
(50%) of the prior year’s net income of GaozhiSoft, to be paid in the form of
Series P Preferred Stock (the “Earn-Out Payments”).
Additionally, Fonix GS and the Sellers
entered into a side letter agreement, dated February 18, 2009 (the “Side
Letter”), modifying certain closing conditions of the Exchange Agreement, as
amended by the First Amendment. The Side Letter established certain
conditions regarding: (1) management and directorships of GaozhiSoft; (2) filing
of certain administrative government documents in China; and (3) operations of
GaozhiSoft.
The final closing conditions were met,
and the share exchange transaction closed as of March 27, 2009.
Notice
of Breach
In the Notice, the Company stated that
certain events of default and other breaches (the “Designated Defaults”) had
occurred and were continuing under the Agreements as of the date of the
Notice. The Company listed five Designated Defaults that were
required to be cured by January 22, 2010, including the failure of the General
Manager of GaozhiSoft to provide financial information, to cooperate with the
Company’s auditors, and to pay certain fees owed to the Company. The
Sellers failed to cure any of the Designated Defaults which were to be cured by
January 22, 2010.
Additionally, the Company listed
twenty-five Designated Defaults that are required to be cured by January 29,
2010. These included the failure to diligently prosecute all
necessary government applications; unauthorized changes in the charter or bylaws
of certain of the companies; the failure to list all material contracts in the
Exchange Agreement and amendments; the failure to deliver correct and complete
copies of each such agreement; the failure to deliver original certificates
representing G-Soft shares; the failure to deliver possession of all documents,
books, records (including tax records), agreements, and financial data of any
sort relating to the companies; discouraging third-parties from maintaining the
same business relationships with the companies after the closing; the change in
the capitalization of GaozhiSoft; the failure to provide access to all records
of the companies within 5 days of the date of the Side Letter; the failure to
provide the Company with a business plan for GaozhiSoft; the failure to pay
closing costs associated with the Agreements; and the failure to deliver all
books, records, certificates, licenses and seals of G-Soft Inc.
As noted, G-Soft, GaozhiSoft, and the
Sellers (as applicable) failed to meet the January 22, 2010, cure
deadline. If G-Soft, GaozhiSoft, or the Sellers (as applicable) do
not cure the Designated Defaults listed in the Notice which are to be cured by
January 29, 2010, the Company intends to exercise any and all rights and
remedies available to it under the Exchange Agreement, any amendments or other
agreements, and applicable laws.
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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FONIX
CORPORATION
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(Registrant)
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Date:
January 27, 2010
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By:
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/s/
Roger D. Dudley
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Roger
D. Dudley
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President
and Chief Executive Officer
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(Principal
Executive Officer)
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