FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION STATEMENT NO. 333-111402
SSP SOLUTIONS, INC.
PROSPECTUS SUPPLEMENT NO. 1 DATED JUNE 8, 2004
TO PROSPECTUS DATED JANUARY 23, 2004
The prospectus of SSP Solutions, Inc. dated January 23, 2004 is
supplemented to include the following updated information:
"SELLING SECURITY HOLDERS - PRIVATE PLACEMENTS IN WHICH THE SELLING SECURITY
HOLDERS OBTAINED BENEFICIAL OWNERSHIP OF THE OFFERED SHARES" BEGINNING AT
PAGE 32 AND "PLAN OF DISTRIBUTION" BEGINNING AT PAGE 48 ARE REVISED TO REFLECT
THE FOLLOWING:
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SERIES A PREFERRED AMENDMENT AND MERGER AGREEMENT WITH SAFLINK CORPORATION
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On March 22, 2004, we signed a definitive Agreement and Plan of Merger
and Reorganization with SAFLINK Corporation, or SAFLINK, whereby we propose to
merge with a wholly-owned subsidiary of SAFLINK and survive as SAFLINK's
wholly-owned subsidiary. As conditions to the closing of the merger, among
other things we must no longer have outstanding any preferred stock at the
effective time of the merger and we must meet certain cash reserve requirements.
In addition, should the merger not close, it is still important that we build
cash reserves to pursue a number of important strategic initiatives that will
help us reach our full potential. To facilitate conversion of all preferred
shares into shares of our common stock, we have obtained stockholder approval
of a Series A Preferred amendment. Additionally, we have made a special warrant
offer as described below to assure meeting the cash reserve closing requirement
and build cash reserves should the merger not close.
Series A Preferred Amendment
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On May 13, 2004, we filed a definitive information statement relating
to a proposed amendment to our Certificate of Designation, Preferences and
Rights of Series A Preferred Stock. The amendment will add a new Article IV.F to
the certificate of designation that will make each share of Series A Preferred
automatically convertible, without any action on the part of the holder, into
10,000 shares of our common stock immediately prior to the effective time of the
merger. As a result, at the effective time of the merger, we will have no shares
of Series A Preferred outstanding and will be in a position to satisfy that
condition to the closing of the merger.
New Article IV.F will also provide that certain restrictions on
convertibility of Series A Preferred provided for in the certificate of
designation will not apply to automatic conversions under Article IV.F, such
that all shares of Series A Preferred will be automatically converted
immediately prior to the effective time of the merger.
The only differences in the terms of the Series A Preferred before and
after the amendment will be:
o The Series A Preferred is not presently automatically convertible
into common stock immediately prior to the effective time of the
merger. Upon the filing of a certificate of amendment with the
Secretary of State of Delaware, it will be so convertible; and
o The Series A Preferred is not presently convertible into common
stock to the extent that conversion would cause the holder,
together with its affiliates, to beneficially own more than 4.99%
of our outstanding common stock. This restriction will be removed,
in as far as it pertains to automatic conversions immediately
prior to the effective time of the merger, upon filing of a
certificate of amendment with the Secretary of State of Delaware,
such that the Series A Preferred will be automatically converted
into shares of common stock regardless of the percentage of common
stock ownership of the holders thereof and their affiliates after
conversion.
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Our board of directors unanimously approved the amendment and
recommended its adoption by our stockholders by a unanimous written consent of
the board effective as of April 15, 2004. The holders of a majority of the
shares of our common stock and at least 75% of the shares of our Series A
Preferred outstanding as of the record date, who include executive officers,
affiliates of executive officers and major stockholders who have ongoing
business and personal relationships with each other and communicate regularly (a
total of five common stockholders and their affiliates and four Series A
Preferred holders, one of whom is also a common stockholder, and their
affiliates), approved the amendment by written consent dated effective as of
April 23, 2004. Unless sooner abandoned by our board of directors, the
certificate of amendment reflecting the amendment will be filed with the
Secretary of State of Delaware, and therefore effective, no earlier than
June 11, 2004.
Special Warrant Offer
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In order to raise funds need to satisfy the cash reserve requirement
of the merger with SAFLINK and build cash reserves to pursue a number of
important strategic initiatives that will help us reach our full potential
should the merger not close, on June 8, 2004, we made a special warrant offer,
or SWO, to holders of the A-1 warrants, A-2 warrants, September 2003 bridge
warrants, April 2002 warrants, and the warrant issued to Integral Systems, Inc.,
which we collectively refer to below as the SWO warrants. The SWO primarily
involves a reduction in the exercise prices of the SWO warrants held by those
who participate in the SWO.
Under the terms of the SWO, the exercise price of a participant's A-2
warrants will be reduced to $1.25 per share and the exercise price of a
participant's A-1 warrants and September 2003 bridge warrants will be reduced to
$1.00 per share, provided that the participant exercises all of the
participant's A-2 warrants on or before June 21, 2004. Also, the exercise price
of a participant's April 2002 warrants will be reduced to $1.00 per share,
provided that the participant exercises all of the participant's April 2002
warrants on or before June 21, 2004. In addition, the exercise price of the
Integral Systems warrant will be reduced to $1.00 per share, provided that
Integral Systems exercises the warrant for cash in full on or before June 21,
2004. Except as specifically provided in the SWO, the terms of the SWO warrants
will remain in full force and effect including, with respect to any SWO warrants
that a participant does not exercise on or prior to June 21, 2004, an increase
in the exercise price of the unexercised SWO warrants to $1.50 or $1.75 per
share, as applicable, on July 22, 2004.
Participants in the SWO waive any anti-dilution adjustments to the
SWO warrants that might otherwise have become operable as a result of the SWO.
In addition, the participants agree that between the date of their receipt of
the SWO and the closing date of our proposed merger with SAFLINK Corporation,
the participants will not sell short or otherwise take any short positions in
our common stock or in SAFLINK Corporation's common stock.
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