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 11, 2005
PERFECTDATA CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-12817 95-3087593
(Commission File Number) (I.R.S. Employer Identification No.)
1445 East Los Angeles Avenue, Simi Valley, CA 93065
(Address of Principal Executive Offices) (Zip Code)
(805) 581-4006
(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 (see General Instruction A.2 below):
Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
Soliciting material pursuant to Rule 14a-12 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-d(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
INFORMATION TO BE INCLUDED IN THE REPORT
Section 8 - Other Events
Item 8.01. Other Events.
On January 12, 2005, PerfectData Corporation (the "Company") entered into a
non-binding letter of intent (the "Letter of Intent") with Sona Mobile, Inc., a
privately-owned Washington corporation ("Sona"). A copy of the Letter of Intent
is filed as Exhibit 10.1 to this Report, and a copy of the press release issued
by the Company and Sona on January 12, 2005 relating thereto is filed as Exhibit
10.2 to this Report, and both are incorporated herein by this reference. There
is no relationship among the Company and any of its affiliates, on the one hand,
and Sona, on the other hand, other than the Letter of Intent.
Sona, which was incorporated in 2003 and which is headquartered in Toronto,
Canada, develops and markets data applications for mobile devices in the
wireless data market place that enable its customers to: (1) receive streamed
data real-time on a continuous basis; (2) executed secure transactions in
real-time; (3) exchange data with corporate systems in real-time; and (4)
integrate customers' in-house information with publicly available information of
news services such as Telerate.
As previously reported, effective June 1, 2004, Spray Products Corporation
("Spray") had assumed full responsibility for managing the customers of the
Company, so that all revenues therefrom were going to Spray and, after obtaining
shareholder consent, on November 29, 2004, the related assets of the Company's
operating business were sold to Spray. Also, as previously reported, the Board
of Directors of the Company had announced its intention not to liquidate the
Company, but to continue its search for a merger partner so as to add business
operations to the Company.
The Letter of Intent contemplates that the parties will prepare, negotiate
and then execute a merger agreement (the "Merger Agreement") pursuant to which
Sona would be merged (the "Merger") with and into a wholly-owned subsidiary of
the Company to be incorporated and the Sona shareholders would receive from the
Company, in exchange for their shares of Sona common stock and preferred stock,
shares of a to - be - designated Series A Voting Convertible Preferred Stock,
$.01 par value (the "Series A Preferred Stock"), of the Company that would be
convertible into such number of shares of the Company's Common Stock, $.01 par
value (the "Common Stock"), as is equal to 80% of the issued and outstanding
shares of the Common Stock on a fully-diluted basis on the date the Merger is
consummated (the "Closing Date"). In addition, if the Merger were to be
consummated, then, on the Closing Date, four of the five directors of the
Company and all of its officers would resign, to be replaced by designees of
Sona. The Letter of Intent also contemplates that the Sona shareholders could
receive in the future additional shares of the Common Stock equal to 5% of the
outstanding shares on a fully diluted basis as of the Closing Date pursuant to a
formula to be determined and set forth in the Merger Agreement.
Sona has provided in the Letter of Intent that a condition precedent to its
closing with the Company is that the Company have a tangible net worth of at
least $1,100,000 on the
Closing Date, in default of which the shares issuable to the Sona shareholders
would proportionately increase.
Neither party has completed its due diligence of the other, including the
Company's review of a draft of audited financial statements of Sona for its
fiscal years ended December 31, 2003 and 2004. As indicated above, the Letter of
Intent is non-binding, except that once the Company has reviewed and accepted
such financial statements and otherwise completed its due diligence to its
satisfaction, a party thereafter terminating the Merger without cause shall be
required to reimburse the non-terminating party for its fees, costs, and
expenses in connection with the Letter of Intent and to pay the non-terminating
party $250,000 if it enters into a merger or sale or purchase of assets within
12 months of the Terminating Party's notice. The parties have also agreed not to
solicit an alternative transaction, with the directors of each reserving the
right to act if failure to act would be inconsistent with their fiduciary duties
under applicable law.
There can be no assurance that a Merger Agreement will be executed or that
thereafter the Merger will be consummated.
Section 9 - Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(a) Exhibits.
Number Description of Exhibit
10.1 Letter of Intent dated January 11, 2005 by and between Sona
Mobile , Inc. and the Company.
10.2 Press release dated January 12, 2005 relating to the Letter of
Intent filed as Exhibit 10.1 hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to a Report to be signed on its behalf
by the undersigned hereunto duly authorized.
PERFECTDATA CORPORATION
(Registrant)
Date: January 13, 2005 By: /s/ Harris A. Shapiro
Harris A. Shapiro
Chairman of the Board and
Chief Executive Officer
Index to Exhibits Filed with Report
-------------- ---------------------------------------------------------------------------------------- -----------
Number Description of Exhibits Page
-------------- ---------------------------------------------------------------------------------------- -----------
-------------- ---------------------------------------------------------------------------------------- -----------
10.1 Letter of Intent dated January 11, 2005 by and between Sona Mobile , Inc. and the E-2
Company.
-------------- ---------------------------------------------------------------------------------------- -----------
-------------- ---------------------------------------------------------------------------------------- -----------
10.2 Press release dated January 12, 2005 relating to the Letter of Intent filed as Exhibit E-10
10.1 hereto.
-------------- ---------------------------------------------------------------------------------------- -----------
Exhibit 10.1
SONA MOBILE, INC.
Victoria Tower
44 Victoria Street
Toronto, Ontario M5C 1Y2
CANADA
January 11, 2005
PerfectData Corporation
1445 East Los Angeles Avenue, Suite 208
Simi Valley, CA 93065
Attn: Harris Shapiro, CEO
Dear Mr. Shapiro:
This Letter of Intent will confirm the following general terms upon which
Sona Mobil, Inc., a corporation organized under the laws of the State of
Washington ("Sona"), will merge (the "Merger") with and into a wholly-owned
subsidiary to be incorporated (the "Merger Subsidiary") of PerfectData
Corporation, a corporation organized under the laws of the State of Delaware
("PerfectData"). Except for the provisions of Paragraphs D and E hereof, none of
the terms set forth in this Letter of Intent shall be binding on either party
hereto. Immediately upon the execution and delivery of this Letter of Intent,
the parties hereto, either directly or through their authorized representatives,
shall begin preparing a Merger Agreement (the "Agreement"), which shall contain
all of the definitive terms of the Merger, including such representations,
warranties, covenants, agreements, conditions and contingencies and indemnities
as are typically incorporated in such agreements.
A. Basic Transaction.
(i) As set forth above, on the Closing Date (as defined below), Sona
will merge with and into the Merger Subsidiary, which will be
the surviving corporation.
(ii) In the Merger, the shareholders of Sona will receive shares of
PerfectData's Series A Voting Convertible Preferred Stock (the
"Series A Preferred Stock") in exchange for their Sona capital
stock (common and preferred). In addition to any rights,
privileges and preferences as may be described in this Letter of
Intent, the Series A Preferred Stock shall have such terms and
provisions as shall be agreed to by the parties.
(iii) The Series A Preferred Stock issued in the Merger shall (a) have
a liquidation preference (the specific amount of which will be
agreed to by the parties), (b) have the right to vote on an as
converted basis on all matters submitted to shareholders and (c)
be convertible into 80% of the issued and outstanding shares of
the common stock of PerfectData on a fully-diluted basis on the
Closing Date (as defined below); provided, however, the Series A
Preferred Stock shall be convertible into 85% of the fully
diluted issued and outstanding shares of the common stock of
PerfectData as of the Closing Date pursuant to a formula to be
set forth in the Merger Agreement.
(iv) As currently contemplated, the Transaction will qualify as a
tax-free reorganization under Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended.
B. Basic Conditions to the Merger.
(i) PerfectData shall have obtained the approval of its Board of
Directors to file and shall have filed a Certificate of
Designation to its Certificate of Incorporation to designate the
Series A Preferred Stock.
(ii) On the Closing Date, PerfectData shall have a tangible net worth
of at least $1.1 million (as adjusted below, the "Minimum Net
Worth"), after taking into account all expenses, fees and costs
incurred in connection with the Merger and any commitments and
contingencies that are not reflected on PerfectData's balance
sheet; provided, however, if the Closing Date of the Merger has
not occurred on or before April 15, 2005, the Minimum Net Worth
shall be reduced by the cost to PerfectData of preparing and
filing a Form 10-KSB for the year ended March 31, 2005; provided
further, however, that such costs will be "capped" at $75,000.
To the extent PerfectData's tangible net worth on the Closing
Date is less than the Minimum Net Worth, the relative holdings
of the Sona shareholders and the PerfectData shareholders as set
forth in Paragraph A.(iii) above shall be adjusted
proportionately. At any time prior to the Closing Date
PerfectData may raise additional equity capital through the sale
of its common stock; provided, however, that, without the prior
written consent of Sona, which consent may not be unreasonable
withheld, PerfectData may not sell any equity securities to any
single person or group of persons in a single transaction if
such person or group of persons would, as a result, own 5% or
more of the issued and outstanding shares of PerfectData'
capital stock after the Merger unless such person or persons
owned 5% or more of PerfectData's capital stock before the
Merger. Notwithstanding anything contained herein to the
contrary, in the event PerfectData's tangible net worth on the
Closing Date is less than $750,000, PerfectData shall have been
deemed the Terminating Party under Paragraph E.(i).
(iii) On the Closing Date PerfectData shall be current on all its
filings under the Securities and Exchange Act of 1934 and its
common stock shall be listed on the OTC Bulletin Board.
(iv) PerfectData shall have received confirmation from its auditors
that it will be able to properly and timely file a Form 8-K with
the United States Securities and Exchange Commission with
respect to the Merger.
C. Merger Agreement.
(i) Basic Transaction. The Merger Agreement shall provide for
implementation of the basic transaction, as described herein.
(ii) Representations and Warranties. The Merger Agreement shall
contain customary and usual representations, warranties,
covenants and agreements by the parties, including
representations and warranties relating to qualifications, due
authorizations, non-contravention, consents and approvals,
capitalization, financial condition, taxes, filings under the
Securities and Exchange Act of 1934, material agreements, legal
proceedings, legal and regulatory compliance and employees. The
principal executive officer, the secretary and the chief
financial officer of each of the parties shall certify the
representations and warranties "to the best of his or her
personal knowledge and information."
(iii) Closing Conditions and Indemnification. The Merger Agreement
shall contain customary and usual conditions for Closing,
including the delivery at Closing of favorable opinions of
counsel for the corporate parties with respect to customary and
usual matters of law, as well as usual and customary
indemnification and hold harmless provisions.
D. Exclusive Dealing.
(i) Beginning on the date hereof Sona shall not, and shall not
permit any of its officers, directors, employees, agents or
representatives to, directly or indirectly (through any
affiliates), solicit, initiate or accept any discussions,
submissions of proposal or offers or negotiations with, or
participate in any negotiations or discussions with, or provide
any information or data of any nature whatsoever to, or
otherwise cooperate in any other way with, or assist or
participate in, facilitate or encourage any effort or attempt
by, or enter into any agreement with, any person other than
PerfectData concerning any merger, sale of substantially all of
its assets, sale of shares of its capital stock or other equity
securities, or any similar transaction, in each case, involving
Sona (such transactions being hereinafter referred to as
"Alternative Sona Transactions") or authorize or permit any of
its respective officers, directors, employees, agents or
representatives to take any such action with respect to an
Alternative Sona Transaction.
(ii) Beginning on the date hereof, PerfectData shall not, and shall
not permit any of its officers, directors, employees, agents or
representatives to, directly or indirectly (through any
affiliates), solicit, initiate or accept any discussions,
submissions of proposal or offers or negotiations with, or
participate in any negotiations or discussions with, or provide
any information or data of any nature whatsoever to, or
otherwise cooperate in any other way with, or assist or
participate in, facilitate or encourage any effort or attempt
by, or enter into any agreement with, any person other than Sona
concerning any merger, sale of shares of its capital stock or
other equity securities, or any similar transaction, in each
case, involving PerfectData (such transactions being hereinafter
referred to as "Alternative PerfectData Transactions") or
authorize or permit any of their respective officers, directors,
employees, agents or representatives to take any such action
with respect to an Alternative PerfectData Transaction.
(iii) Notwithstanding anything to the contrary in this Paragraph, if,
at any time prior to Closing, the Board of Directors of either
party determines, based upon advice from outside legal counsel,
that failure to act could reasonably be expected to be
inconsistent with the Board's fiduciary duties under applicable
law, such party may provide information with respect to such
party to another person or entity that has made an unsolicited
proposal for an Alternative Transaction and participate in
discussions and negotiations with such person or entity relating
to such Alternative Transaction.
E. Break-Up Fee.
(i) Except as otherwise provided in Paragraphs E.(ii) - (iv) below,
in the event either party hereto (the "Terminating Party") shall
notify the other party hereto (the "Non-Terminating Part") at
any time prior to Closing that the Terminating Party is
abandoning or terminating the Merger and within 12 months of
such notice the Terminating Party enters into a merger agreement
or other agreement relating to the sale or purchase of assets
with another party, then the Terminating Party shall immediately
pay to the Non-Terminating Party an amount equal to the sum of
(i) the fees, costs and expenses (including attorneys fees)
incurred by the Non-Terminating Party in connection with this
letter of intent and the Merger and (ii) $250,0000.
(ii) Notwithstanding Paragraph E.(i) above, a Terminating Party shall
have no liability to a Non-Terminating Party if the
Non-Terminating Party has (a) materially breached a
representation or warranty contained in the Merger Agreement or
(b) if, during the course of its due diligence investigation,
the Terminating Party reasonably concludes that the
Non-Terminating Party will not be able to make a representation
or warranty contemplated by the Merger Agreement without a
material exception to such representation or warranty or (c) if
the Non-Terminating Party fails to satisfy a material closing
condition contained in the Merger Agreement.
(iii) Either party may terminate this Letter of Intent and abandon the
Merger for any reason without any liability to the other party
at any time before the Commitment Time (as defined in Paragraph
E.(iv) below).
(iv) On or about January 24, 2005, Sona shall deliver a draft of its
audited consolidated financial statements for the years ended
December 31, 2003 and 2004 to PerfectData. PerfectData shall
then have approximately 48 hours to review such financial
statements. In the event PerfectData determines that the
information set forth in such financial statements is materially
inconsistent with financial information previously supplied by
Sona it shall have the right to terminate this Letter of Intent
and abandon the Merger without incurring any penalty. In order
to exercise this right, PerfectData must provide Sona with
written notice thereof no later than 5:00 p.m. New York City
time on the second business day following the receipt of such
financial statements (the "Commitment Time").
F. Other.
(i) Expenses. Each of PerfectData and Sona will bear their
respective costs, and neither party shall have liability to any
other party for any expense of the other party.
(ii) Conduct of Business Pending Closing. From the date hereof until
the Closing or earlier termination of this letter of intent or
abandonment of the Merger, (a) PerfectData will not engage in
any business and none of its assets will be sold or disposed of,
except for certain post-closing actions taken to complete the
sale of its business operations to Spray Products Corporation,
and it will not incur any liabilities except those in the
ordinary cause of business (including legal and accounting
expenses) or with the written consent of Sona, and (b) Sona will
operate its business in the ordinary course and consistent with
past practice.
(iii) All notices or other information deemed required or necessary to
be given to any of the parties shall be given at the following
addresses:
PerfectData: 1445 East Los Angeles Avenue, Suite 208
Simi Valley, CA 93065
Attention: Harris Shapiro, CEO
Fax: (805) 581-4574
With a copy to: Robert W. Berend, Esq.
Wachtel & Masyr 110 East 59h Street
New York, New York 10022
Fax: (212) 909-9455
Sona: Victoria Tower
44 Victoria Street, Suite 801
Toronto, Ontario M5C 1Y2
CANADA
Attn: Mr. John Bush
Fax: (416) 866-2970
With a copy to: Joel J. Goldschmidt, Esq.
Morse, Zelnick, Rose & Lander LLP
405 Park Avenue, Suite 1401
New York, New York 10022-4405
Fax: (212) 838-9190
(iv) Any finder's fee or similar payments with respect to the Merger
shall be paid by the party or parties agreeing to such fees or
payment; in this respect. Sona has agreed to pay a finder's fee
to Colebrooke Capital, Inc.
(v) The transactions which are contemplated herein, to the extent
permitted, shall be governed by and construed in accordance with
the laws of the State of Delaware.
(vi) The parties agree to begin their due diligence investigation of
the other immediately and to cooperate with each other in
connection with the conduct of such due diligence
investigations. Each party and its agents, attorneys and
representatives shall have full and free access to the
properties, books and records of the other party (the
confidentiality of which the investigating party agrees to
retain) for purposes of conducting investigations of the other
party. At the earlier of the date of the public announcement of
the discussions of the transaction, the date of the public
announcement of the transaction, or the date of the execution of
the Agreement, each party to the transaction (and each employee,
representative, or other agent of the taxpayer) may disclose to
any and all persons, without limitations of any kind, the tax
treatment and tax structure of the transactions and all
materials of any kind (including opinions or other tax analyses)
that are provided to the party relating to such tax treatment
and tax structure. In addition, no party is subject to any
restriction concerning its consulting with its tax adviser
regarding the tax treatment or tax structure of the transaction
at any time. Sona acknowledges that immediately following the
execution of this Letter of Intent, PerfectData will deliver a
preliminary due diligence request and that Sona will use its
reasonable best efforts to respond to such request within seven
(7) business days. Nothing herein shall preclude PerfectData
from amending, modifying or supplementing such preliminary due
diligence request.
(vii) The substance of any public announcement with respect to the
Merger, other than notices required by law, shall be approved in
advance by all parties or their duly authorized representatives.
(viii) Four of the five current members of the Board of Directors and
all of the current officers of PerfectData shall resign at
Closing or as soon as
practical thereafter and be replaced by those designated by the
PerfectData stockholders and the newly constituted Board of
Directors of PerfectData after the Closing.
(ix) This Letter of Intent may be executed in any number of
counterparts and each such counterpart shall be deemed to be an
original instrument, but all of such counterparts together shall
constitute but one agreement.
(x) The term Closing Date shall refer to the calendar date on which
the Merger is consummated. The term Closing refers to the actual
consummation of the Merger.
Except as provided in Paragraphs D, E and F.(iv), this letter merely
evidences the intention of the parties hereto and is not intended to be legally
binding. With respect to Paragraph F.(iv), each of PerfectData and Sona hereby
indemnifies and holds harmless the other party hereto and its affiliates, from
any and all claims, liabilities, damages costs and judgments arising in
connection with or relating to any agreements, written or oral, which it has or
is deemed to have entered into, directly or indirectly, with any broker, finder
or banker relating to the Merger.
If the foregoing correctly sets forth the substance of the understanding of
the parties, please execute this letter in duplicate, retain one copy for your
records, and return one to our counsel, Joel J. Goldschmidt, c/o Morse, Zelnick,
Rose & Lander LLP, 405 Park Avenue, Suite 1401, New York, New York 10022; you
may send one signed copy by facsimile transmission to 212-838-9190.
Very truly yours,
SONA MOBILE, INC.
By: /s/ John Bush
John Bush, President
PERFECTDATA CORPORATION
Accepted this 12th day of January, 2005.
By: /s/ Harris A. Shapiro
Harris Shapiro, Chief Executive Officer
Exhibit 10.2
PERFECTDATA CORPORATION SIGNS
LETTER OF INTENT TO MERGE WITH SONA MOBILE, INC.
SIMI VALLEY, CA - January 12, 2005 - PerfectData Corporation (OTC Bulletin
Board: PERF.OB) and Sona Mobile, Inc. announced today they have entered into a
non-binding letter of intent to merge.
Sona Mobile Inc. (http://www.sonamobile.com), founded in 2003, through its
wholly owned subsidiary, Sona Innovations Inc., provides mobile business
solutions through a comprehensive suite of wireless solutions that allow
enterprises to mobilize business applications rapidly and cost effectively. Sona
Mobile has offices and subsidiaries in the United States, Canada and the United
Kingdom.
Sona's team brings together experience in mobility technology,
telecommunications, financial markets and e-commerce. Beginning with it's
flagship product, MobileMarkets(TM), which is used by some of the world's
largest financial institutions; Sona is committed to providing business and
financial application platforms (i.e. Real-Time Markets Data, Streaming Mobile
TV, Financial Trading, Mobile Sarbanes Oxley Compliance...etc) that are open,
easy to deploy, secure and scaleable.
Under the terms of the letter of intent, the shareholders of Sona Mobile
initially will own 80% of the merged entity and could own an additional 5%
pursuant to a formula to be set forth in the merger agreement. The transaction
is subject to completion of due diligence, execution of a definitive merger
agreement, and satisfying other material conditions.
More information on Sona Mobile can be found at the company's corporate website
- www.sonamobile.com
Safe Harbor
This news release contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
are valid only as of today, and we disclaim any obligation to update this
information. These statements, which include, but are not limited to, the
successful completion of the proposed merger and the benefits expected to be
derived therefrom, are subject to known and unknown risks and uncertainties that
may cause actual future experience and results to differ materially from the
statements made. These statements are based on our current beliefs and
expectations as to such future outcomes. Readers are cautioned not to place
undue reliance on these forward-looking statements.
PerfectData Contact: Sona Mobile Contact:
Harris A. Shapiro John Bush
President & Chairman President & CEO
805-581-4006 416-866-4100