Satellite Security says noteholders will seize assets to remedy defaults

By Sheri Kasprzak

New York, July 2 - Satellite Security Corp. said Monday in an 8-K filed with the Securities and Exchange Commission that holders of its outstanding debt will foreclose on the company's assets, including the stock of its subsidiaries.

The company has not had any significant operations since March 7, when its operating subsidiary, S3, ceased operations.

The company had, as of June 1, $3.5 million due under a secured convertible promissory note agreement. The company defaulted on the note, which was issued in principal of $3.3 million in July 2006, when it failed to make an interest payment in December 2006.

"Given our unsuccessful attempts to obtain additional financing or to find a strategic transaction that would permit us to begin operations, we and S3 agreed to consent to the noteholders' exercise of their remedies ... and the foreclosure upon substantially all of our assets, including the shares of stock we hold in our subsidiaries," the company said in the 8-K.

"In exchange for our consent, the noteholders agreed to waive all defaults under the loan documents and convert the notes into approximately 90% of our outstanding common stock."

To effect such a conversion, the company needs the approval of its stockholders for a 1-for-500 reverse stock split, the 8-K said. Following the split and other transactions under the agreement, the noteholders would hold 2 million common shares, 1 million of which will be transferred to Zirk Englebrecht, S3's chief executive officer.

The $3.3 million in notes bore interest at 10% annually, were due July 13, 2009 and were convertible at a price equal to 75% of the volume-weighted average price of the company's stock for the five trading days before conversion.

Satellite, based in San Diego, had developed global positioning system-based technologies for the security of personnel, vehicles and equipment.

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