Attached files
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EX-4.1 - WORLDGATE COMMUNICATIONS INC | v179345_ex4-1.htm |
EX-3.1 - WORLDGATE COMMUNICATIONS INC | v179345_ex3-1.htm |
EX-10.1 - WORLDGATE COMMUNICATIONS INC | v179345_ex10-1.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 29, 2010
__________________________
WorldGate
Communications, Inc.
(Exact
Name of Registrant as Specified in its Charter)
__________________________
Delaware
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000-25755
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23-2866697
|
(State
or Other Jurisdiction of
|
(Commission
File Number)
|
(I.R.S.
Employer
|
Incorporation
or Organization)
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Identification
No.)
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3190
Tremont Avenue
Trevose,
Pennsylvania 19053
(Address
of Principal Executive Offices) (Zip Code)
(215)
354-5100
(Registrant’s
telephone number,
including
area code)
(Former
Name or Former Address, if Changed Since Last Report)
__________________________
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:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01
|
Entry
into a Material Definitive
Agreement.
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On March
30, 2010, Ojo Video Phones LLC (the “OJO”), a subsidiary
of WorldGate Communications, Inc. (the “Company”), entered
into the First Amendment (the “MPA Amendment”) to
Master Purchase Agreement with ACN Digital Phone Service, LLC (“ACN”), pursuant to
which the Master Purchase Agreement, dated April 6, 2009 (the “Master Purchase
Agreement”), was amended.
Pursuant
to the Master Purchase Agreement, ACN has committed to purchase from OJO 300,000
videophones over a two-year period. On April 6, 2009, in connection
with the Master Purchase Agreement, the Company granted ACN a warrant to
purchase up to approximately 38.2 million shares of the Company’s common stock
at an exercise price of $0.0425 per share (the “ACN 2009
Warrant”). The ACN 2009 Warrant will vest incrementally based
on ACN’s purchases of video phones under the Master Purchase
Agreement.
Among
other changes, the MPA Amendment amends the Master Purchase Agreement as
follows:
|
·
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As
soon as practicable after OJO provides a demonstration to ACN of the
working video phone contemplated by the Master Purchase Agreement, ACN
will issue its first purchase order under the Master Purchase Agreement
for 80,000 video phones.
|
|
·
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ACN
shall pay OJO 50% of the purchase price for video phones pursuant to a
purchase order upon the later of (a) acceptance of the purchase order by
OJO and (b) five (5) weeks prior to the delivery of video phones to ACN at
OJO’s manufacturing facility. ACN shall pay OJO the remaining
50% of the purchase price upon delivery of the video phones to ACN at
OJO’s manufacturing facility.
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In
connection with the MPA Amendment, the Company granted ACN a warrant to purchase
up to 3 million shares of the Company’s common stock at an exercise price of
$0.0425 per share (the “ACN 2010
Warrant”). The ACN 2010 Warrant will vest incrementally based
on ACN’s purchases of video phones under the Master Purchase Agreement, as
amended by the MPA Amendment.
The
Company is majority owned by WGI Investor LLC. The ultimate ownership
of WGI Investor LLC includes owners of the parent entity of ACN. Each
of Robert Stevanovski, Anthony Cassara, David Stevanovski and Gregory Provenzano
is a director of the Company, has an indirect ownership interest in WGI Investor
LLC, has an ownership interest in the parent entity of ACN and has a director,
officer and/or advisory position with the parent entity of ACN. As a
result of these relationships, each of Robert Stevanovski, Anthony Cassara,
David Stevanovski and Gregory Provenzano may be deemed to have a direct or
indirect interest in the transactions contemplated by the MPA Amendment and ACN
2010 Warrant. Due to the preceding facts, the independent members of
the Audit Committee of the Board of Directors of the Company and independent
members of the Board of Directors of the Company separately considered,
discussed and approved the MPA Amendment and ACN 2010 Warrant.
The
foregoing description of the ACN 2010 Warrant and MPA Amendment does not purport
to be complete and is qualified in its entirety by reference to ACN 2010 Warrant
and MPA Amendment, which are attached as Exhibit 4.1 and 10.1 hereto,
respectively, and are incorporated herein by reference.
Item
4.02
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Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report or
Completed Interim Review.
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On March
29, 2010, the Board of Directors of the Company determined that the Company’s
quarterly financial statements for the fiscal quarters ended June 30, 2009 and
September 30, 2009 should no longer be relied upon. After reviewing
comments from the Securities & Exchange Commission (the “SEC”), the issues
raised in management’s discussions with the staff of the SEC, the literature
cited by the SEC, and the documentation relating to certain transactions with
WGI Investor LLC (“WGI”) and ACN
described below, the Company has determined that it should revise its original
accounting for the following transactions: (1) the closing on April
6, 2009 of the transactions contemplated by the Securities Purchase Agreement,
dated December 12, 2008 (“Securities Purchase
Agreement”), between WGI and the Company, including the issuance to WGI
of an aggregate of 202,462,155 shares of the Company’s common stock and the
issuance to WGI of a warrant to purchase up to approximately 140.0 million
shares of Company’s common stock in certain circumstances and (2) the Master
Purchase Agreement pursuant to which ACN committed to purchase from the Company
300,000 video phones over a two-year period. Related to these
transactions, the Company also reviewed, but did not revise, its original
accounting for the following transactions: (a) the payment by ACN to the Company
of $1,200,000 to fund certain software development costs and (b) the issuance to
ACN of a warrant to purchase up to 38,219,897 shares of the Company’s common
stock at an exercise price of $0.0425 per share, which vests incrementally based
on ACN’s purchases of video phones.
The
Company had previously determined that the value received by WGI pursuant to the
closing on April 6, 2009 of the transactions contemplated by the Securities
Purchase Agreement exceeded the fair value received by the Company by
approximately $74,463,000 and the Company initially accounted for $60,000,000 of
such excess in fair value as a deferred revenue asset and the balance of such
excess in fair value as a $14,463,000 expense. The Company has now
determined that the value received by WGI in connection with the closing of such
transactions should be reflected as an equity transaction valued at
approximately $7,199,000 (which is the sum of the fair value of the
consideration given by WGI to the Company in exchange for the securities issued
by the Company to WGI). As a result, each of the Form 10-Qs for the
fiscal quarters ended June 30, 2009 and September 30, 2009 is being restated to
reflect the reversal of the entries originally recorded for this excess in fair
value, including (a) the reversal of an expense of approximately $14,463,000,
(b) the reversal of the recording of a deferred revenue asset of $60,000,000 and
(c) the reversal of a credit originally recorded to the additional paid in
capital account on the Company’s balance sheet.
In
addition, the deferred revenue asset of $60,000,000 would have offset
$60,000,000 of future revenue from ACN pursuant to the Master Purchase
Agreement. As a result of the revision to the accounting for the
closing on April 6, 2009 of the transactions contemplated by the Securities
Purchase Agreement, there will be no deferred revenue asset of $60,000,000 and
therefore no offset of such amounts against future revenue from ACN pursuant to
the Master Purchase Agreement. Any future revenue from ACN pursuant
to the Master Purchase Agreement will be recognized as revenue consistent with
applicable general accepted accounting principles, including an offset to such
revenue related to the issuance to ACN of a warrant to purchase up to 38,219,897
shares of the Company’s common stock as such warrant becomes exercisable
pursuant to its terms.
Consistent
with the Company’s prior analysis, the Company will continue to treat the
payment by ACN to the Company of $1,200,000 to fund certain software development
costs as deferred revenue which will be recognized upon completion of the
development of the Company’s next generation video phone.
The Board
of Directors of the Corporation has discussed with its independent registered
public accounting firm the matters disclosed in this Item 4.02. The
Company intends to file amended quarterly reports on Form 10-Q for the fiscal
quarters ended June 30, 2009 and September 30, 2009 as soon as practicable.
The
impact of the restatements will have the primary effects of (1) reducing the
Company’s reported net loss for the three month period ended June 30, 2009 from
approximately $18,802,000 to approximately $4,339,000 with no change to the
Company’s reported net loss for the three month period ended September 30, 2009
and (2) reducing the Company’s reported assets by $60,000,000 with a
corresponding reduction to the Company's stockholders’ equity.
Item
5.03
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Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
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The
Company filed a Certificate of Elimination of the Series A Convertible Preferred
Stock of WorldGate Communications, Inc., dated March 26, 2010 (“Certificate of
Elimination”), with the Secretary of State of the State of Delaware on
March 29, 2010, to eliminate all references in the Company’s Amended and
Restated Certificate of Incorporation to the Series A Convertible Preferred
Stock. The Certificate of Elimination eliminated the previous
designation of 7,550 shares of Series A Convertible Preferred Stock and caused
such shares of Series A Convertible Preferred Stock to resume their status as
undesignated shares of preferred stock of the Company. No shares of
the Company’s preferred stock are currently outstanding.
The
foregoing description of the Certificate of Elimination does not purport to be
complete and is qualified in its entirety by reference to Certificate of
Elimination, which is attached as Exhibit 3.1 hereto and is incorporated herein
by reference.
Item
8.01
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Other
Events
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The
Company has scheduled a conference call on Tuesday, April 6, 2010 at 4:30PM
Eastern Time. Management will discuss the financial results for the
fourth quarter and for its full fiscal year ended December 31, 2009 and
will provide an overview of the business. The conference call
telephone number is 719-457-2715 or 800-946-0716 and the conference confirmation
code is 6727477. A replay of the conference call will be available
for one week after the call on our web site at www.wgate.com.
Item
9.01
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Financial
Statements and Exhibits.
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(d)
Exhibits.
3.1
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Certificate
of Elimination of the Series A Convertible Preferred Stock of WorldGate
Communications, Inc., dated March 26, 2010
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4.1
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Warrant,
dated March 30, 2010, issued to ACN Digital Phone Service,
LLC
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10.1
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First
Amendment, dated March 30, 2010, to Master Purchase Agreement, by and
between ACN Digital Phone Service, LLC and Ojo Video Phones LLC [Certain
information in this exhibit has been omitted and has been filed separately
with the SEC pursuant to a confidential treatment request under
Rule 24b-2 of the Securities Exchange Act of 1934, as
amended]
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SIGNATURE
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.
WORLDGATE
COMMUNICATIONS, INC.
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Dated: March 30,
2010
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By:
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/s/ Christopher V. Vitale
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Name:
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Christopher
V. Vitale
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Title:
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Senior
Vice President, Legal and Regulatory, General Counsel and
Secretary
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EXHIBIT
INDEX
Exhibit
No.
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Description
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3.1
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Certificate
of Elimination of the Series A Convertible Preferred Stock of WorldGate
Communications, Inc., dated March 26, 2010
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4.1
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Warrant,
dated March 30, 2010, issued to ACN Digital Phone Service,
LLC
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10.1
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First
Amendment, dated March 30, 2010, to Master Purchase Agreement, by and
between ACN Digital Phone Service, LLC and Ojo Video Phones LLC [Certain
information in this exhibit has been omitted and has been filed separately
with the SEC pursuant to a confidential treatment request under
Rule 24b-2 of the Securities Exchange Act of 1934, as
amended]
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