The latest press release about financing.
27-Jul-2005
Entry into Material Agreement, Termination of Material Agreement, Financia
Item 1.01 Entry into a Material Definitive Agreement
On June 23, 2005, we entered into a $160.0 million Standby Equity Distribution Agreement with Cornell Capital Partners, LP for the future issuance and purchase of shares of our common stock. This Standby Equity Distribution Agreement establishes what is sometimes termed an equity line of credit or an equity draw down facility and replaces our previous $30.0 million Standby Equity Distribution Agreement, which was terminated by the parties on June 23, 2005. Cornell Capital Partners is a private limited partnership whose business operations are conducted through its general partner, Yorkville Advisors, LLC.
In general, the draw down facility operates like this: Cornell Capital Partners committed to provide us up to $160.0 million as we request it over a 24-month period (or a five-year period if we file either an amendment to the then effective registration statement or a new registration statement is declared effective after the 24th and 48th month after June 23, 2005), in return for common stock that we will issue to Cornell Capital Partners. In addition, we engaged Newbridge Securities Corporation, a registered broker-dealer, to advise us in connection with the equity line of credit. For its services, Newbridge Securities Corporation received 75,188 of shares of our common stock. As of June 23, 2005, we have $160.0 million available under this facility. We may request an advance every seven trading days. The amount of each advance is subject to a maximum amount of $3.0 million every seven trading days. A closing will be held six trading days after such written notice at which time we will deliver shares of common stock and Cornell Capital Partners will pay the advance amount. For each share of common stock purchased under the equity line of credit, Cornell Capital Partners will pay 98% of the lowest closing bid price on the OTC Bulletin Board or other principal market on which our common stock is traded for the five days immediately following the notice date.
We have agreed to pay to Cornell Capital Partners a cash fee of $16.0 million in connection with the Standby Equity Distribution Agreement, and Cornell Capital Partners will retain 5% of each advance under the equity line of credit. The issuance of these shares is conditioned upon us registering these shares with the Securities and Exchange Commission. We may request advances under the equity line of credit once the underlying shares are registered with the Securities and Exchange Commission. We may continue to request advances until Cornell Capital Partners has advanced $160.0 million or two years (or 5 years if we file either an amendment to the then effective registration statement or a new registration statement is declared effective after the 24th and 48th month after June 23, 2005) after the effective date of the accompanying registration statement, whichever occurs first.
The amount of capital available under the equity line of credit is not dependent on the price or volume of our common stock. Cornell Capital Partners may not own more than 9.9% of our outstanding common stock at any time. Because Cornell Capital Partners can repeatedly acquire and sell shares, this limitation does not limit the potential dilutive effect or the total number of shares that Cornell Capital Partners may receive under the equity line of credit.
We cannot predict the actual number of shares of common stock that will be issued pursuant to the equity line of credit, in part, because the purchase price of the shares will fluctuate based on prevailing market conditions and we have not determined the total amount of advances we intend to draw. Nonetheless, we can estimate the number of shares of our common stock that will be issued using certain assumptions. For example, we would need to issue 1,000,000,000 shares of common stock in order to raise the maximum amount under the equity line of credit at a net purchase price of $0.16.
In connection with the execution of the Standby Equity Distribution Agreement, on June 23, 2005, we entered into a Registration Rights Agreement with Cornell Capital Partners pursuant to which we agreed to prepare and file with the Securities and Exchange Commission a registration statement on Forms S-1, SB-2 or on such other form as is available under the Securities Act of 1933, as amended. We must cause such registration statement to be declared effective by the Securities and Exchange Commission prior to our first draw down on our new $160.0 million equity line of credit and the first sale to Cornell Capital Partners of our common stock pursuant to the Standby Equity Distribution Agreement.
On June 23, 2005, we also entered into a $30.0 million Securities Purchase Agreement with Cornell Capital Partners and Highgate House Funds, Ltd. pursuant to which we agreed to issue 10% convertible debentures and warrants to Cornell Capital Partners and Highgate House Funds. The $8.0 million convertible debenture issued to Cornell Capital Partners, the $2.0 million convertible debenture issued to Highgate House Funds and the warrants issued were amended and restated on July 21, 2005 to designate Cornell Capital Partners and Highgate House Funds, as applicable, as the trustee for LCC Global Limited, a corporation organized under the laws of Cyprus, under the respective convertible debentures and warrants. In accordance with the Securities Purchase Agreement, we issued, pursuant to Rule 506 of Regulation D under the Securities Act, for a purchase price of $30.0 million, (i) a 10% convertible debenture due June 23, 2008, with a principal balance of $20 million, to Cornell Capital Partners, as trustee for LCC Global Limited, (ii) a 10% convertible debenture due June 23, 2008, with a principal balance of $8 million, to Cornell Capital Partners, as trustee for LCC Global Limited and (iii) a 10% convertible debenture due June 23, 2008, with a principal balance of $2 million, to Highgate House Funds, as trustee for LCC Global Limited. The outstanding principal under the convertible debentures bears interest at the rate of 10% per annum, calculated on the basis of a 360-day year.
With respect to the $20.0 million convertible debenture issued to Cornell Capital Partners, principal will be due and payable in 32 equal installments. The installments of principal will be due and payable commencing on November 1, 2005, and subsequent installments will be due and payable on the first day of each calendar month thereafter until the outstanding principal balance is paid in full or the $20.0 million convertible debenture is converted in full. Interest on the outstanding principal balance will accrue as of June 23, 2005 and be due and payable monthly, in arrears, commencing on November 1,
2005, and will continue on the first day of each calendar month thereafter that any amounts of the convertible debenture remain payable. In lieu of making an interest payment in cash we may elect to make interest payments in shares of our . . .
Item 1.02. Termination of a Material Definitive Agreement.
See Item 1.01 above for information regarding the termination of our $30.0 million equity line of credit with Cornell Capital Partners and its replacement with our new $160.0 million equity line of credit.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
See Item 1.01 above with respect to our issuance of $30.0 million in 10% convertible debentures.
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