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 11, 2004
The CattleSale Company
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(Exact name of registrant as specified in its charter)
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Delaware 001-07636 74-1605174
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
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9901 IH-10 West, Suite 800, San Antonio, Texas 78230-2292
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(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code 210-558-2898
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Item 5. Other Events
The CattleSale Company (the "Buyer") has entered into a letter of intent with
CowTek, Inc. (the "Seller") dated as of March 7, 2004 for the proposed
acquisition of certain assets of the Seller. A press release announcing
the proposed acquisition and a copy of the letter of intent are attached
as exhibits 99.1 and 99.2, respectively.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
99.1 Press Release dated March 11, 2004
99.2 Letter of Intent between The CattleSale Company and CowTek, Inc. dated
March 7, 2004
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.
The CattleSale Company
(Registrant)
Date: March 11, 2004
By: /s/ Phillip P. Krumb
Phillip P. Krumb
Chief Financial Officer
Exhibit 99-1
FOR IMMEDIATE RELEASE
THE CATTLESALE COMPANY SIGNS LETTER OF INTENT TO ACQUIRE COWTEK INC.
San Antonio, Texas, March 11, 2004...The CattleSale Company (BB OTC "CTLE")
announced today that it has entered into a letter of intent to acquire the
cattle identification, traceability and data management division of CowTek, Inc.
CowTek, Inc., headquartered in Brule, Nebraska, www.cowtek.com, is the industry
leader in ISO Memory tag technology with a cutting edge proprietary distributive
database management system for the identification and traceability of individual
cattle records. This high tech production system has been designed to modernize
and improve the livestock industry with affordable production tools, which allow
each animal to carry its own data in an ISO Memory Tag creating a unique
distributed database. The production tools, consisting of production management
software, utilizes industry ISO read/write hardware technology to communicate
data to and from each animal wearing the ISO Memory Tag (data chip) forming the
distributed database, which is less controversial and easier to use than what is
currently available in the market place. With the appropriate pass code, the
data chip can be accessed and managed allowing the producers to keep control of
this valuable data and build value into the sale of the animal(s) to each
segment of the livestock industry. This new platform also allows the livestock
industry to meet new consumer and export guidelines along with government
mandates. The fact that the animal's information remains on the data chip and
can be updated by each owner is significantly different from other industry ID
systems on the market that rely on read only ID tags with a centralized database
system separate from the animal. The application of this unique traceability
system can extend beyond the live production chain of the cattle industry all
the way to the end consumer.
The potential addition of the CowTek technology to the CattleSale Company will
not only add a very attractive business unit to the company's current revenue
base, but it will also give the CattleSale.com trading platform a significant
advantage as the first electronic cattle trading platform in the country that
will offer traceable source verified cattle as one of its product choices.
"There is a lot of synergy between our customer base and the products available
from CowTek," stated CattleSale chairman Ed McMillan.
"The recent incident of Mad Cow Disease in the U.S. has put tremendous pressure
on the cattle industry to adopt a tracking solution. The industry could take
months if not years to initiate a reasonable solution. That potential vacuum in
the industry is exactly why we are attracted to CowTek because their system is
de-centralized and can be easily adapted to any final structure mandated by the
government. Prior to a final industry standard format, the CowTek products can
provide the producer significant production management tools that can add
immediate value within a reasonable cost structure," stated David Geiman,
CattleSale CEO.
The acquisition is structured around the issuance of 300,000 shares of
CattleSale Company $10 Convertible Preferred Stock B and 4,000,000 stock options
on CattleSale common stock exercisable between $.25 and $.75 for a combined
exercise price of $2,120,000. Fully exercised, the dilution to CattleSale would
be approximately 13%. The transaction has an expected close date of April 15,
2004 and is contingent on final due diligence, a definitive purchase agreement
and approval of both companies' board of directors.
"The strength of the CattleSale management team, the CattleSale.com trading
platform, their client base and the fact that the company is publicly traded
made a very compelling story," said Gary Marsh President, CEO and co-founder of
CowTek, Inc. Mr. Marsh will remain as president of the CowTek division.
Contact:
David Geiman, CEO
The CattleSale Company
San Antonio, Texas 78230
(210) 558 2898
This press release contains forward-looking statements about the
business, financial condition and prospects of the Company. The actual results
of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties, including
without limitation, the risks associated with entering into a new line of
business, changes in product demand, the reliability of the internet, changes in
competition, economic conditions, new product development, changes in tax and
other governmental rules and regulations applicable to the Company, and other
risks indicated in the Company's filings with the Securities and Exchange
Commission. These risks and uncertainties are beyond the ability of the Company
to control, and in many cases, the Company cannot predict the risks and
uncertainties that could cause its actual results to differ materially from
those indicated by the forward-looking statements. When used in this press
release the words "believes," "estimates," "plans," "expects," and "anticipates"
and similar expressions as they relate to the Company or its management are
intended to identify forward-looking statements.
Exhibit99.2
The CattleSale Company, Inc.
710 North York Road
Hinsdale, IL 60521
March 7, 2004
PERSONAL & CONFIDENTIAL
Mr. Gary F. Marsh CowTek, Inc, President & CEO 715 State Street
Brule, NE 69127
VIA FAX TRANSMISSION
Dear Gary:
The purpose of this letter is to set forth our mutual understanding in
connection with the proposed acquisition of certain assets (the Assets) of
CowTek, Inc (the "Seller") by The CattleSale Company (the "Buyer"):
1. The Seller. The Seller is headquartered in Brule, Nebraska with a
California "C" Corp. and has developed proprietary productivity tools,
which include hardware, software and decentralized database solutions,
specific to the livestock industry.
2. Purchase of Assets. The Buyer proposes to acquire certain Assets, free and
clear of all liens, claims and encumbrances. A summary of the Assets
included, but not limited to, are below;
Description of CowTek (Seller) Assets
>> Agriculture Related License of IDCOMM Published Patent
AP 20030023517 A1
>> All other applied patents, Trade Mark or perceived products >>
CowTek name, Trademarks and all associated goodwill >> Customer lists,
equipment, inventory, software and all
intellectually property
>> Non-compete agreement with all Directors, Shareholders and
employees
>> Employment agreement with Gary Marsh to be created and in place
prior to close of escrow
>> Exclusive of the ETD Bolus Program
The parties anticipate that the closing shall occur on or before April 15, 2004.
3. Liabilities. Buyer assumes responsibility for ninety thousand dollars
($90,000) of critical CowTek payables that will be paid out over an 18
month schedule beginning immediately following Closing.
4. Agreements. Honor prior agreements with McGinely Schilz (Advisory
Board) Exhibit B
5. Purchase Price. The purchase price to be paid by the Buyer for the
Assets shall consist of the following:
Description of CattleSale (Buyer) Payment:
>> $3 million Dollars face amount (300,000 shares) of The
CattleSale Company $10 Series B Cumulative, Convertible
Preferred Stock. See Section 8
>> 450,000 10-cent stock purchase options for CattleSale Common
stock (CTLE) issued to Gary Marsh for employment agreement.
>> 1,000,000 CTLE Stock options exercisable at $.12 for 2 years
>> 1,000,000 CTLE Stock options exercisable at $.50 for 3 years
>> 2,000,000 CTLE Stock options exercisable at $.75 for 3 Years
6. Provisions for buyback. The Seller will have a 12 month buyback option on
the CowTek assets, in exchange for 300,000 shares of CTLE Preferred B, in
the event of bankruptcy or forced liquidation of Buyer.
7. Board of Directors Representation. The Buyer will nominate for election to
the CattleSale Company Board of Directors, one representative from the
Sellers current Board or management team, at the Sellers recommendation.
8. The Preferred Stock. The rights and preference of the Series B Preferred
Stock ("Preferred Stock"), which each have a par value of $.01 per share,
are as follows:
Dividends: Dividends accrue and are cumulative from the date of
issuance in an annual amount equal to 2.5% per year per share, payable
semi-annually, when, as and if declared by the Board of Directors.
Dividends are payable in cash, shares of Preferred Stock (valued at $10
per share) or shares of Common Stock (valued, (x) if there is a market
for the Common Stock, at the average price of a share of Common Stock
during the last thirty (30) days of trading, or (y) if there is not a
market for the Common Stock, at $1.38 per share), or any combination
thereof.
Conversion: Each share of Preferred Stock is convertible at any time at
the option of the holder into 7.25 shares of Common Stock. Redemption:
At any time after the earlier of: A merger or consolidation effecting
the sale in one or a series of related transactions of all or
substantially all of the Company's assets or a sale of more than fifty
percent (50%) of the Company's outstanding voting securities, or The
realization by the Company of aggregate net proceeds in excess of
$10,000,000 in connection with the sale of Common Stock pursuant to a
public offering registered under the Securities Act of 1933, as amended
(a "Qualified Public Offering"),
9. Definitive Purchase Agreement. Closing of the transactions shall be
subject to the execution and delivery of a definitive Purchase Agreement
(the "Agreement") between the Buyer and the Seller. The Agreement will
contain such representations and warranties, covenants, terms and
conditions as are customary and appropriate for a transaction of this type
including, without limitation, the parties' obligations to close being
conditioned on obtaining any required shareholder and board of director or
other governing body consents and completion of due diligence.
10. Non-Competition Agreement. In connection with the closing of the sale of
the Assets and other transactions described herein, the Seller and each of
members of the Board of Directors and senior management of the Seller prior
to the closing shall enter into non-competition agreements prohibiting such
persons from engaging in any livestock identification or tracking
businesses competitive with the business of the Buyer.
11. Non-Competition Exclusion Agreement. The Bolus technology and its current
marketed capabilities as an Identification system and unique temperature
protocol are excluded from the Non-Compete. A sub license will be granted
for the Memory Tag Portion at no charge to the next buyer for the ETD Bolus
Only.
12. Confidentiality. Seller acknowledges that the Buy is a publicly traded
company and is bound by very strict restrictions on the release of
information. Both Buyer and Seller agree to at all times maintain the
confidentiality of all confidential and/or proprietary information of both
CowTek and CattleSale companies and will not disclose such information, or
use it for any purpose other than its evaluation of the proposed
transaction. Seller will not release any information on this potential
transaction to any party outside of its senior management team, without the
prior consent of the Buyer, or as otherwise required by law.
13. Expenses. The Seller and the Buyer shall each be responsible for their own
respective legal, due diligence, accounting and/or financing fees or
expenses.
14. Exclusivity Period. In connection with the proposed transactions, you
understand that the Buyer will require a brief period of cooperation to
complete its due diligence investigation. Accordingly, the Seller, and its
agents, agrees to negotiate exclusively with the Buyer with respect to any
transactions relating to the Seller's Assets of the kind described in this
letter during the period ending on May 15, 2004 (the "Exclusivity Period").
During the Exclusivity Period, the Buyer and Seller shall use their
commercially reasonable best efforts to negotiate and execute a definitive
Agreement, in form and substance satisfactory to the respective parties and
their attorneys.
15. Amendment; Assignment. This Letter of Intent may not be amended except by
an agreement in writing, signed by all parties. The Buyer or the Seller
without the written consent of all parties shall not assign this Letter of
Intent.
16. Governing Law. This Letter of Intent shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
17. Binding Provisions. Only the provisions of paragraphs 8 through 12 shall
constitute the legally binding and enforceable obligations of the parties
hereto.
If you agree to the foregoing, please so signify by executing the enclosed
copy of this letter in the space provided and delivering it to us
Very truly yours,
The CattleSale Company, Inc.
By:/s/ David W. Pequet
Name: David W. Pequet
Title: Director
AGREED TO AND ACCEPTED:
On this 7th day of March 2004
CowTek, Inc.
By:/s/Gary F. Marsh
Gary F. Marsh
President, CEO