SCHEDULE 13D
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
GSE SYSTEMS, INC.
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(Name of Issuer)
Common Stock, no par value
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(Title of Class of Securities)
36227K106
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(CUSIP Number)
May 26, 2005
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(Date of Event which Requires Filing of this Statement)
Dolphin Direct Equity Partners, LP
c/o Dolphin Asset Management Corp.
129 East 17th Street
New York, New York 10003
Telephone: (212) 982-5071
Attn: Peter E. Salas
with a copy to:
Gary J. Simon
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
Telephone: (212) 837-6000
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of secs. 240.13d-1(e), 240.13d-1(f) or
240.13d-1(g), check the following box [ ].
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on this cover page shall not be deemed to be
"filed" for the purposes of Section 18 of the Securities Exchange Act of 1934
("Act") or otherwise subject to the liabilities of the Act but shall be subject
to all other provisions of the Act (however, see the Notes).
SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 2 OF 13 |
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| 1 | NAME OF REPORTING PERSONS |
| | Peter E. Salas |
| | S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS |
| | (Intentionally Omitted) |
|----|-------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| |
| | (b) |_| |
|----|-------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
|----|-------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS |
| | AF |
|----|-------------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |
| | PURSUANT TO ITEMS 2(d) OR 2(e) |_| |
|----|-------------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | U.S. |
|----------------------------------------------------------------------------- |
| | 7 | SOLE VOTING POWER |
| | | 1,419,913 |
| NUMBER OF |----|--------------------------------------------------|
| SHARES | 8 | SHARED VOTING POWER |
| BENEFICIALLY | | 0 |
| OWNED BY |----|--------------------------------------------------|
| EACH | 9 | SOLE DISPOSITIVE POWER |
| REPORTING | | 1,419,913 |
| PERSON WITH |----|--------------------------------------------------|
| | 10 | SHARED DISPOSITIVE POWER |
| | | 0 |
|----------------------------------------------------------------------------- |
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | 1,419,913 |
|----|-------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |_| |
| | SHARES* |
|----|-------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | 13.6% |
|----|-------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON* |
| | IN |
------------------------------------------------------------------------------
SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 3 OF 13 |
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| 1 | NAME OF REPORTING PERSONS |
| | Dolphin Management, Inc. |
| | S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS |
| | (Intentionally Omitted) |
|----|-------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| |
| | (b) |_| |
|----|-------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
|----|-------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS |
| | AF |
|----|-------------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |
| | PURSUANT TO ITEMS 2(d) OR 2(e) |_| |
|----|-------------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | Delaware |
|----------------------------------------------------------------------------- |
| | 7 | SOLE VOTING POWER |
| | | 0 |
| NUMBER OF |----|--------------------------------------------------|
| SHARES | 8 | SHARED VOTING POWER |
| BENEFICIALLY | | 1,419,913 |
| OWNED BY |----|--------------------------------------------------|
| EACH | 9 | SOLE DISPOSITIVE POWER |
| REPORTING | | 0 |
| PERSON WITH |----|--------------------------------------------------|
| | 10 | SHARED DISPOSITIVE POWER |
| | | 1,419,913 |
|----------------------------------------------------------------------------- |
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | 1,419,913 |
|----|-------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |_| |
| | SHARES* |
|----|-------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | 13.6% |
|----|-------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON* |
| | CO |
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SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 4 OF 13 |
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| 1 | NAME OF REPORTING PERSONS |
| | Dolphin Advisors, LLC |
| | S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS |
| | (Intentionally Omitted) |
|----|-------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| |
| | (b) |_| |
|----|-------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
|----|-------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS |
| | AF |
|----|-------------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |
| | PURSUANT TO ITEMS 2(d) OR 2(e) |_| |
|----|-------------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | Delaware |
|----------------------------------------------------------------------------- |
| | 7 | SOLE VOTING POWER |
| | | 0 |
| NUMBER OF |----|--------------------------------------------------|
| SHARES | 8 | SHARED VOTING POWER |
| BENEFICIALLY | | 1,419,913 |
| OWNED BY |----|--------------------------------------------------|
| EACH | 9 | SOLE DISPOSITIVE POWER |
| REPORTING | | 0 |
| PERSON WITH |----|--------------------------------------------------|
| | 10 | SHARED DISPOSITIVE POWER |
| | | 1,419,913 |
|----------------------------------------------------------------------------- |
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | 1,419,913 |
|----|-------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |_| |
| | SHARES* |
|----|-------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | 13.6% |
|----|-------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON* |
| | OO (limited liability company) |
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SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 5 OF 13 |
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------------------------------------------------------------------------------
| 1 | NAME OF REPORTING PERSONS |
| | Dolphin Direct Equity Partners, LP |
| | S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS |
| | (Intentionally Omitted) |
|----|-------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| |
| | (b) |_| |
|----|-------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
|----|-------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS |
| | WC |
|----|-------------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |
| | PURSUANT TO ITEMS 2(d) OR 2(e) |_| |
|----|-------------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | U.S. |
|----------------------------------------------------------------------------- |
| | 7 | SOLE VOTING POWER |
| | | 0 |
| NUMBER OF |----|--------------------------------------------------|
| SHARES | 8 | SHARED VOTING POWER |
| BENEFICIALLY | | 1,419,913 |
| OWNED BY |----|--------------------------------------------------|
| EACH | 9 | SOLE DISPOSITIVE POWER |
| REPORTING | | 0 |
| PERSON WITH |----|--------------------------------------------------|
| | 10 | SHARED DISPOSITIVE POWER |
| | | 1,419,913 |
|----------------------------------------------------------------------------- |
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | 1,419,913 |
|----|-------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |_| |
| | SHARES* |
|----|-------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | 13.6% |
|----|-------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON* |
| | PN |
------------------------------------------------------------------------------
SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 6 OF 13 |
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ITEM 1. SECURITY AND ISSUER
The class of equity security to which this statement relates is the
common stock, no par value (the "COMMON STOCK") of GSE Systems, Inc., a Delaware
corporation (the "COMPANY"). The address of the principal executive offices of
the Company is 9189 Red Branch Road, Columbia, Maryland 21045.
ITEM 2. IDENTITY AND BACKGROUND
This statement is being jointly filed by each of the following persons
pursuant to Rule 13d-1(k) promulgated by the Securities and Exchange Commission
(the "COMMISSION") pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"): Peter E. Salas ("MR. SALAS"), Dolphin
Management Inc., a New York corporation ("DOLPHIN MANAGEMENT"), Dolphin
Advisors, LLC, a New York limited liability company ("DOLPHIN ADVISORS"), and
Dolphin Direct Equity Partners, LP, a Delaware limited partnership ("DOLPHIN
DIRECT"). Mr. Salas, Dolphin Management, Dolphin Advisors and Dolphin Direct are
collectively referred to as the "REPORTING PERSONS." Mr. Salas is a United
States citizen.
The principal business address of Mr. Salas, Dolphin Management,
Dolphin Advisors and Dolphin Direct is c/o Dolphin Asset Management Corp., 129
East 17th Street, New York, New York 10003.
Dolphin Direct is a private investment fund. Dolphin Advisors is the
sole managing general partner of Dolphin Direct. The principal business of
Dolphin Advisors is to serve as investment manager to Dolphin Direct and another
private investment fund. Dolphin Management is the sole managing member of
Dolphin Advisors. The principal business of Dolphin Management is to serve as
investment manager to Dolphin Advisors and Dolphin Direct and certain other
entities. Mr. Salas is the sole shareholder and President of Dolphin Management.
The principal business of Mr. Salas is to act as the sole shareholder and
President of Dolphin Management and as the principal of investment funds.
During the past five years, none of the Reporting Persons and, to the
knowledge of the Reporting Persons, none of the executive officers or directors
of the Reporting Persons, if applicable, has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors), or has been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On May 26, 2005, pursuant to a Senior Subordinated Secured Convertible
Note and Warrant Purchase Agreement, dated as of May 26, 2005 (the "Agreement"),
the Company issued and sold to Dolphin Direct, for an aggregate price of
$2,000,000, a senior subordinated secured convertible note of the Company in the
aggregate principal amount of $2,000,000 (the "Note") and a warrant (the
SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 7 OF 13 |
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"Warrant") to purchase 380,952 shares (the "Warrant Shares") of Common Stock.
This transaction is herein referred to as the "Financing."
As of the financing, the Common Stock is listed on the American Stock
Exchange (the "Amex"). Under Section 713 of the Amex Company Guide, companies
with securities listed on the Amex must obtain stockholder approval before the
sale, issuance, or potential issuance of their common stock, or securities
convertible into their common stock, in connection with a transaction other than
a public offering, equal to 20% or more of their outstanding common stock, for
less than the greater of book or market value of their common stock.
The Note is convertible, in part or in whole, into shares of Common
Stock based on a conversion price of $1.925. However, the conversion price, and
thus the number of shares into which the Note may be converted, is subject to
adjustment, including upon certain dilutive issuances or deemed issuances of
Common Stock. Under these adjustment provisions, the Company may be required to
issue, upon conversion of the Note (when aggregated with the number of shares of
Common Stock issued upon exercise of the Warrant), 20% or more of the
outstanding shares of Common Stock on May 26, 2005 for less than the greater of
book or market value of their common stock. Accordingly, under the Amex's rules,
the Company is seeking to obtain stockholder approval for any such issuance.
Under the terms of the Agreement and Note, notwithstanding the
adjustment provisions of the Note, the number of shares of Common Stock actually
issued on conversion of the Note, when aggregated with the number of shares of
the Common Stock actually issued or issuable upon exercise of the Warrant, will
not exceed 19.99% of the outstanding shares of the Common Stock on May 26, 2005
(the "Conversion Share Limit"). However, the Note provides that the Conversion
Share Limit will terminate upon the effectiveness of the consent to the
transaction by stockholders holding a majority of the outstanding shares of
Common Stock, in compliance with the stockholder approval requirements of the
Amex.
On May 19, 2005, the Company obtained the written consent (the
"Majority Consent") of GP Strategies Corporation ("GP Strategies"), as holder of
a majority of the outstanding shares of the Common Stock. Under the rules of the
Exchange Act, the effectiveness of the Majority Consent, and the termination of
the Conversion Share Limit, will become effective on the day following the 20th
day after the Company's information statement relating to the Financing (the
"INFORMATION STATEMENT") is mailed to the Company's stockholders. The Company
mailed a preliminary Information Statement with the Commission on May 27, 2005.
In light of the limited conditions prior to the termination of the Conversion
Share Limit, this Schedule 13D reports the ownership of the Common Stock by the
Reporting Persons on the basis that such termination has occurred.
THE AGREEMENT. On May 26, 2005, pursuant to the Agreement, the Company
issued the Note and the Warrant to Dolphin Direct for an aggregate purchase
price of $2,000,000, less certain fees the Company agreed to pay to or on behalf
SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 8 OF 13 |
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of Dolphin Direct. Of such purchase price, $500,000 was placed in escrow until
the termination of the Conversion Share Limit. If the Conversion Share Limit has
not been terminated by the 75th day after the closing date, such $500,000 will
be paid to Dolphin Direct.
Under the Agreement, the Company has agreed, among other things, not
to, and to cause its subsidiaries not to, while the Note is outstanding, (i)
acquire, sell or otherwise transfer any material assets or rights of the Company
or a subsidiary, or enter into any contract or agreement relating to the sale of
assets, which is not consummated pursuant to an arms length transaction, (ii)
enter into any contract, agreement or transaction with any officer, director,
stockholder or affiliate of the Company or a subsidiary other than ordinary
course transactions that are consistent with past practice and pursuant to arms
length terms, (iii) pay or declare any dividend or make any distribution upon,
redeem, retire or repurchase or otherwise acquire, any shares of capital stock
or other securities of the Company or a subsidiary, other than certain dividends
currently owed to ManTech International, or (iv) materially change the Company's
or any subsidiary's line of business as currently conducted.
The Company has agreed to file, within 30 days of the closing of the
Financing, a registration statement covering the resale by Dolphin Direct of all
shares of Common Stock issuable pursuant to the Note or the Warrant. The Company
has also agreed to use its best efforts to have such registration statement
declared effective by the Commission as soon as possible thereafter, but in no
event later than 90 days after the closing of the Financing, and to keep the
registration statement effective thereafter until all such securities have been
sold or can be sold without most restrictions. If the Company does not meet the
deadlines for filing and effectiveness of the registration statement, the
Company will be required to pay Dolphin Direct 2% of the outstanding principal
of the Note for each 30-day period the Company is late. The Company has also
agreed to provide piggyback registration rights if at any time there is not an
effective registration statement covering the resale by Dolphin Direct of all
shares of Common Stock issuable pursuant to the Note or the Warrant.
THE NOTE. The Note is in the principal amount of $2,000,000 and
matures on March 31, 2009. The Note initially bears interest at the rate of 8%
per annum. Interest is payable in arrears on the last day of each calendar
quarter and all principal and accrued interest is payable upon maturity. The
interest rate will decrease, for each quarter during which the registration
statement registering the shares of common stock into which the Note is
convertible is in effect, by 2% per annum for each 25% increment over the
conversion price achieved by the Company's Common Stock price.
The Note is convertible, in part or in whole, into a number of shares
of Common Stock equal to the principal and interest of the Note being converted
divided by an initial conversion price of $1.925. However, if the Company issues
or sells any shares of Common Stock or securities exercisable or exchangeable
for or convertible into common stock (excluding certain shares, including shares
issued to Dolphin Direct, under certain employee benefit plans or pursuant to
outstanding options or convertible securities) for a consideration per share
less than the then effective conversion price, then the conversion price will be
reduced to an amount equal to the consideration per share in such new issuance.
SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 9 OF 13 |
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The conversion price will also be appropriately adjusted upon any stock split,
stock dividend, recapitalization, combination, or similar transaction.
Notwithstanding such adjustment provision, the number of shares of Common Stock
actually issued on conversion of the Note will be limited by the Conversion
Share Limit until the effectiveness of the Majority Consent on the day following
the twentieth day after the Information Statement is mailed to the Company's
stockholders. If the Company fails to issue a certificate for the shares into
which the Note has been converted within three days of such conversion, the
Company will be required to pay, for each day the Company is late, an amount
equal to 1% of the product of number of shares to which Dolphin Direct is
entitled and the closing price of the Common Stock on the last day that the
Company could have delivered such certificate.
Events of default under the Note include, among other things, and with
certain cure periods, the suspension of trading or failure to be listed on one
of certain markets, failure to comply with certain agreements with Dolphin
Direct (such as a failure to comply with the conversion provisions of the Note,
a failure to have sufficient shares authorized for conversion, and a failure to
pay principal or interest or other amount when due), failure to pay material
indebtedness, and bankruptcy. Upon and during the continuance of an event of
default of the Note, the interest rate will increase to 24%. The holder of the
Note may require the Company to redeem all or any portion of the Note upon an
event of default for a price equal to the greater of the amount of the principal
and interest of the note to be redeemed or the product of the number of shares
of Common Stock into which such principal and interest is convertible multiplied
by the closing trading price of the Common Stock immediately prior to the event
of default.
The holder of the Note will be entitled to participate in any pro rata
issuance or sale of securities to the Company's stockholders to the extent that
the holder would have been able to participate if the Note had been converted to
Common Stock in its entirety.
The Company is prevented, under the terms of the Note, from engaging
in any fundamental transaction (such as a merger, consolidation or sale of the
Company) unless the successor assumes in writing all of the obligations of the
Company under the Note and the successor is a publicly traded company with
common stock traded on the Amex, Nasdaq or the New York Stock Exchange.
The Note ranks senior to all other indebtedness of the Company other
than certain debt connected with the Company's senior credit agreement (or
certain refinancings thereof) and the Company's obligation to repay GP
Strategies for payments made by GP Strategies pursuant to its guaranty of the
Company's senior credit agreement debt, to which the Note is expressly junior,
and certain capitalized leases and contingent obligations. The Company is
prohibited from any additional indebtedness senior to the Note while the Note is
outstanding. The ranking is effectuated by a subordination agreement between the
Company's senior lender, Dolphin Direct, and the Company.
THE WARRANT. The Warrant is exercisable for 380,952 Warrant Shares,
and the initial exercise price is $2.22 per Warrant Share. The exercise price of
the Warrant must be paid in cash, except that if a registration statement is not
SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 10 OF 13 |
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available for the resale of Warrant Shares, the holder may make a "cashless
exercise" of the Warrant. The Warrant expires on the seventh anniversary of its
issuance.
If the Company issues or sells any shares of Common Stock or
securities exercisable or exchangeable for or convertible into common stock
(excluding certain shares, including shares issued to Dolphin Direct, under
certain employee benefit plans or pursuant to outstanding options or convertible
securities) for a consideration per share less than the then effective exercise
price, then the exercise price will be reduced to an amount equal to the
consideration per share in such new issuance, without adjustment to the number
of Warrant Shares issuable on exercise. The exercise price and number of Warrant
Shares will also be appropriately adjusted upon any dividend or distribution of
assets (including any distribution of cash, securities or other property by way
of dividend, spin-off, reclassification, or similar recapitalization,
combination, or similar transaction. If the Company fails to issue a certificate
for the shares for which the Warrant has been exercised within three days of
such conversion, the Company will required to pay, for each day that the Company
is late, an amount equal to 1% of the product of number of shares to which the
Investor is entitled and the closing price of the Common Stock on the last day
that the Company could have delivered such certificate.
The holder of the Warrant will be entitled to participate in any pro
rata issuance or sale of securities to the company's stockholders to the extent
that the holder would have been able to participate if the Warrant had been
exercised in its entirety.
The Company is prevented, under the terms of the Warrant, from
engaging in any fundamental transaction (such as a merger, consolidation, or
sale of the Company) unless the successor assumes in writing all of the
obligations of the Company under the Warrant and the successor is a publicly
traded company with common stock traded on the Amex, Nasdaq or the New York
Stock Exchange.
The Company has granted Dolphin Direct a priority lien on all of its
and its subsidiaries' assets, subject only to certain existing or other
permitted liens, as to which such priority is second.
ITEM 4. PURPOSE OF THE TRANSACTION
The Reporting Persons purchased the Note and the Warrant because of
its belief that the Company represents an attractive investment based on the
business prospects and strategy of the Company.
The Reporting Persons have no present plans or proposals that relate
to or that would result in any of the actions specified in clauses (a) through
(j) of Item 4 of Schedule 13D of the Exchange Act. Nonetheless, the Reporting
Persons may at any time formulate plans or proposals for the Company, including,
among other things, entering into privately negotiated sales of shares of Common
Stock or acquisitions of additional shares of Common Stock, making open-market
sales or purchases, proposing a business combination transaction with the
SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 11 OF 13 |
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Company or making a tender offer for some or all of the Common Stock. It is also
possible that the Reporting Persons will decide not to pursue any such
transaction.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) As of the date of this Schedule 13D, as discussed above, the Reporting
Persons may be deemed to be a group as defined in Rule 13d-5(b) under the
Exchange Act and, as such a group, may be deemed to beneficially own an
aggregate of 1,419,913 shares of Common Stock, which constitute approximately
13.6% of the outstanding shares Common Stock, based on 8,999,706 shares of
Common Stock outstanding as of May 2, 2005 pursuant to the Issuer's Form 10-Q
for the fiscal quarter ended March 31, 2005, on which are based all of the
percentages of outstanding shares of Common Stock set forth herein. The
foregoing and all other amounts of beneficial ownership set forth herein are
calculated pursuant to Rule 13d-3 under the Exchange Act ("RULE 13D-3").
As of the date hereof, Mr. Salas, by virtue of his relationship to
Dolphin Management and Dolphin Advisors, may be deemed to beneficially own all
1,419,913 shares of Common Stock referred to above, which constitute
approximately 13.6% of the outstanding shares of Common Stock. As of the date
hereof, Dolphin Management, by virtue of its relationship with respect to
Dolphin Advisors and Dolphin Direct, may be deemed to beneficially own all
1,419,913 shares of Common Stock referred to above, which constitute
approximately 13.6% of the outstanding shares of Common Stock. As of the date
hereof, Dolphin Advisors, by virtue of its relationship to Dolphin Direct, may
be deemed to beneficially own all 1,419,913 shares of Common Stock referred to
above, which constitute approximately 13.6% of the outstanding shares of Common
Stock. As of the date hereof, Dolphin Direct, by virtue of its ownership of
record of the Note and the Warrant, may be deemed to beneficially own the
1,419,913 shares of Common Stock issuable upon conversion or exercise thereof,
which shares constitute approximately 13.6% of the outstanding shares of Common
Stock. Each of Mr. Salas, Dolphin Management, Dolphin Advisors and Dolphin
Direct owns no shares of Common Stock and, without implying the beneficial
ownership of Common Stock by any other Reporting Person other than as expressly
set forth herein, disclaims beneficial ownership of any shares beneficially
owned by any other Reporting Person.
(b) By virtue of the foregoing relationships, Mr. Salas is deemed to solely
have, and each of Dolphin Management, Dolphin Advisors and Dolphin Direct is
deemed to share, the power to vote or direct the vote of, and to dispose or
direct the disposition of, the shares of Common Stock issuable upon the
conversion of the Note or exercise of the Warrant.
(c) The Note, which is convertible into 1,038,961 shares of Common Stock,
and the Warrant, which is exercisable to purchase 380,952 shares of Common
Stock, were purchased within the last 60 days as described above.
(d) Each of the Reporting Persons affirms that no person other than the
Reporting Persons has the right to receive or the power to direct the receipt of
SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 12 OF 13 |
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dividends from, or the proceeds from the sale of, the shares of Common Stock
deemed to be beneficially owned by such Reporting Person or the Warrant or the
Note.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
As described in Item 4, the Note and the Warrant were purchased in
connection with the Financing, which was consummated as of May 26, 2005. The
Reporting Persons retain complete, independent economic control over their
respective investments in the Note and the Warrant as contemplated herein, and
none of them has made any specific agreement, commitment or arrangement
regarding disposition of the Note, the Warrant or shares of Common Stock
issuable upon conversion or exercise thereof.
Pursuant to Rule 13d-1(k) promulgated under the Exchange Act, the
Reporting Persons have entered into an agreement with respect to the joint
filing of this Schedule 13D and any amendment or amendments hereto, which
agreement is included as an exhibit hereto.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1. Senior Subordinated Secured Convertible Note and Warrant Purchase
Agreement, dated as of May 26, 2005.
Exhibit 2. Senior Subordinated Secured Convertible Note.
Exhibit 3. Common Stock Purchase Warrant.
Exhibit 4. Schedule 13D Joint Filing Agreement.
SCHEDULE 13D
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| CUSIP NO. 13916P100 | | PAGE 13 OF 13 |
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SIGNATURES
After reasonable inquiry and to the best of our knowledge
and belief, we certify that the information set forth in this
statement is true, complete and correct. Pursuant to Rule 13d-1(k)(1),
each of the undersigned agrees that this statement is filed on behalf
of each of us.
June 2, 2005
/s/ Peter E. Salas
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PETER E. SALAS
DOLPHIN MANAGEMENT INC.
By: /s/ Peter E. Salas
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Name: Peter E. Salas
Its: President
DOLPHIN ADVISORS, LLC
By: Dolphin Management Inc.
Its: Managing Member
By:/s/ Peter E. Salas
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Name: Peter E. Salas
Its: President
DOLPHIN DIRECT EQUITY PARTNERS, LP
By: Dolphin Advisors, LLC
Its: Managing Partner
By: Dolphin Management Inc.
Its: Managing Member
By: /s/ Peter E. Salas
----------------------------------------
Name: Peter E. Salas
Its: President