Fellows Energy 8K
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): September 21,
2005
Fellows
Energy Ltd.
(Exact
name of registrant as specified in its charter)
|
Nevada
|
000-33321
|
33-0967648
|
|
(State
or other jurisdiction
|
(Commission
File Number)
|
|
|
of
incorporation)
|
|
Identification
No.)
|
370
Interlocken Boulevard, Suite 400, Broomfield, Colorado 80021
(Address
of principal executive offices and Zip Code)
Registrant's
telephone number, including area code (303) 327-1525
Copies
to:
Marc
Ross, Esq.
Darrin
Ocasio, Esq.
Sichenzia
Ross Friedman Ference LLP
1065
Avenue of the Americas
New
York,
New York 10018
Phone:
(212) 930-9700
Fax:
(212) 930-9725
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[
]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
[
]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
1.01 Entry into a Material Definitive Agreement.
On
September 21, 2005, Fellows Energy Ltd. (the “Company”) closed a financing
pursuant to a securities purchase agreement with two accredited investors for
the issuance of $3,108,000 in face amount of debentures maturing December 21,
2008, and three year warrants to purchase common stock of the company. The
debentures do not accrue interest and the investors paid $2,174,947.52 for
the
debentures. A commission of 8% on $2,000,000 raised was paid by the Company
to
HPC Capital Management (a registered broker-dealer) in connection with the
transaction, and the Company placed $50,000 in escrow for the payment of future
legal fees, resulting in net proceeds to the Company of $1,964,947.52 before
the
Company’s legal fees. Net proceeds will be used by the Company for general
working capital.
The
debentures are unsecured and the Company is obligated to pay 1/24th of the
face
amount of the debenture on the first of every month, starting January 1, 2006,
which payment can be made in cash or in restricted common stock of the Company.
The Company may pay this amortization payment in cash or in stock at the lower
of $0.75 per share (the “Set Price”) or 80% of the volume weighted average price
of the Company’s stock for the five trading days prior to the repayment date,
provided that there is an effective registration statement and the
monthly conversion price is greater of than $0.60. In the event
that
the Company makes the payment in cash, the company shall pay 110% of the monthly
redemption amount.
At
any
time, the debentures are convertible to restricted common stock of the Company
at the Set Price.
At
any
time after 90 days from the date that a registration statement registering
the
shares of common stock underlying the debentures and warrants is declared
effective (the “Effective Date”), and if certain conditions are met, the Company
has the right to redeem some or all of the debentures in a cash amount equal
to
110% of the face amount of the debentures being redeemed.
After
the
Effective Date, if the closing price for our common stock exceeds 250% of the
Set Price for 20 consecutive trading days, the Company can require the holders
to convert some or all of the debentures at the Set Price.
In
the
event of default, the investors may require payment, which shall be the greater
of: (A) 130% of the principal amount of the face amount of the debenture to
be
prepaid, or (B) the principal amount of the debenture to be prepaid, divided
by
the conversion price on (x) the date the default amount is demanded or otherwise
due or (y) the date the default amount is paid in full, whichever is less,
multiplied by the closing price on (x) the date the default amount is demanded
or otherwise due or (y) the date the default amount is paid in full, whichever
is greater
The
Company issued warrants to the investors, expiring September 21, 2008, to
purchase 2,072,000 shares of restricted common stock, at a price per share
of
$0.80. The number of shares underlying the warrants equals 50% of the shares
issuable on full conversion of the debentures at the set price (as if the
debentures were so converted on September 21, 2005). In addition, the exercise
price of the warrants will be adjusted in the event we issue common stock at
a
price below the exercise price, with the exception of any securities issued
pursuant to a stock or option plan adopted by the Company’s board of directors,
issued in connection with the debentures issued pursuant to the securities
purchase agreement, or securities issued in connection with acquisitions or
strategic transactions. Upon an issuance of shares of common stock below the
exercise price, the exercise price of the warrants will be reduced to equal
the
share price at which the additional securities were issued and the number of
warrant shares issuable will be increased such that the aggregate exercise
price
payable for the warrants, after taking into account the decrease in the exercise
price, shall be equal to the aggregate exercise price prior to such
adjustment.
Warrants
to purchase 100,000 shares, at the same price and for the same term as the
warrants issued to the investors, have been issued to HPC Capital Management
as
additional compensation for its services in connection with the transaction
with
the investors.
After
the
Effective Date, if in any period of 20 consecutive trading days the Company’s
stock price exceeds 250% of the warrants’ exercise price, all of the warrants
shall expire on the 30th trading day after the Company sends a call notice
to
the warrant holders. If at any time after one year from the date of issuance
of
the warrants there is not an effective registration statement registering,
or no
current prospectus available for, the resale of the shares underlying the
warrants, then the holder may exercise the warrant at such time by means of
a
cashless exercise. In the event the investors exercise the warrants on a
cashless basis, then we will not receive any proceeds.
The
conversion price of the debentures and the exercise price of the warrants may
be
adjusted in certain circumstances such as if we pay a stock dividend, subdivide
or combine outstanding shares of common stock into a greater or lesser number
of
shares, or take such other actions as would otherwise result in dilution of
the
investors’ position.
The
investors have agreed to restrict their ability to convert their debentures
or
exercise their warrants and receive shares of our common stock such that the
number of shares of common stock held by them in the aggregate and their
affiliates after such conversion or exercise does not exceed 4.99% of the then
issued and outstanding shares of common stock.
The
Company has agreed to file a registration statement with the Securities and
Exchange Commission within 30 days of the effectiveness of the registration
statement filed on August 10, 2005 (file no. 333-127413) to cover the future
sale by the investors of the shares issuable in payment and/or conversion of
the
debentures, and the shares issuable on exercise of the warrants. If the
registration statement is not filed within such 30 day period or if the
registration statement is not declared effective within 120 days from the date
of filing, we are required to pay liquidated damages to the investors. The
registration statement also will cover the future sale by HPC Capital Management
of the shares issuable on exercise of the warrants issued to HPC in connection
with the transaction.
Item
2.03 Creation of a Direct Financial Obligation.
See
Item
1.01 above.
Item
3.02 Unregistered Sales of Equity Securities.
See
Item
1.01 above.
Item
9.01 Financial Statements and Exhibits.
| |
(a)
|
Financial
statements of business
acquired.
|
Not
applicable.
| |
(b)
|
Pro
forma financial
information.
|
Not applicable.
|
Exhibit
Number
|
|
|
4.1
|
|
|
4.2
|
|
|
4.3
|
|
|
4.4
|
|
SIGNATURES
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.
| |
|
|
| |
Fellows
Energy Ltd.
|
|
|
|
| Date: September
22, 2005 |
By: |
/s/ George
S. Young |
| |
|
| |
Chief
Executive Officer
|