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): May 26, 2005
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CirTran Corporation
(Exact Name of Registrant as Specified in Its Charter)
Nevada
(State of Other Jurisdiction of Incorporation)
0-26059 68-0121636
(Commission File Number) (IRS Employer Identification No.)
4125 South 6000 West, West Valley City, Utah 84128
(Address of Principal Executive Offices) (Zip Code)
801.963.5112
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Item 1.01 Entry into a Material Definitive Agreement
Item 2.03 Creation of a Direct Financial Obligation
Item 3.02 Unregistered Sales of Equity Securities
Sale of Convertible Debenture
On May 26, 2005, CirTran Corporation (the "Company") entered into a
securities purchase agreement (the "Purchase Agreement") with Highgate House
Funds, Ltd., a Cayman Island exempted company (the "Investor"), relating to the
sale by the Company of a 5% Secured Convertible Debenture, due December 31,
2007, in the aggregate principal amount of $3,750,000 (the "Debenture").
In connection with the purchase of the Debenture, the Company used
$2,265,000 to repay two promissory notes to Cornell Capital Partners, LP
("Cornell"), one in the amount of $1,700,000, and the other in the amount of
$565,000.
The Company also paid a commitment fee of $240,765.11, a structuring
fee of $10,000 to the Investor, and legal fees of $5,668.17. As such, of the
total purchase amount of $3,750,000, the net proceeds to the Company were
$1,228,566.72. The Company will use these proceeds for general corporate and
working capital purposes, in its discretion.
The Debenture bears interest at a rate of 5%. The Investor is entitled
to convert, at its option, all or part of the principal amount owing under the
Debenture into shares of the Company's common stock at a conversion price equal
to the lesser of (a) $0.10 per share, or (b) an amount equal to the lowest
closing bid price of the Common Stock as listed on the OTC Bulletin Board, as
quoted by Bloomberg L.P. for the twenty (20) trading days immediately preceding
the conversion date. Except as otherwise set forth in the Debenture, the
Investor's right to convert principal amounts owing under the Debenture into
shares of the Company's common stock is limited as follows:
(i) The Investor may convert up to $250,000 worth of the
principal amount plus accrued interest of the Debenture in
any consecutive 30-day period when the market price of the
Company's stock is $0.10 per share or less at the time of
conversion;
(ii) The Investor may convert up to $500,000 worth of the
principal amount plus accrued interest of the Debenture in
any consecutive 30-day period when the price of the
Company's stock is greater than $0.10 per share at the
time of conversion, provided, however, that the Holder may
convert in excess of the foregoing amounts if the Company
and the Holder mutually agree; and
(iii) Upon the occurrence of an event of default (as defined in
the Debenture), the Investor may, in its sole discretion,
accelerate full repayment of all debentures outstanding
and accrued interest thereon or may, notwithstanding any
limitations contained in the Debenture and/or the Purchase
Agreement, convert the Debentures and accrued interest
thereon into shares of the Company's common stock pursuant
to the Debenture.
2
Under the terms of the Debenture, except upon an event of default as
defined in the Debenture, the Investor may not convert the Debenture for a
number of shares of common stock in excess of that number of shares of common
stock which, upon giving effect to such conversion, would cause the aggregate
number of shares of Common Stock beneficially owned by the Investor and its
affiliates to exceed 4.99% of the outstanding shares of the common stock
following such conversion.
Pursuant to the Debenture, interest is to be paid at the time of
maturity or conversion. The Company may, in its option, pay accrued interest in
cash or in shares of its common stock. If paid in stock, the conversion price
shall be the closing bid price of the common stock on either (i) the date the
interest payment is due; or (ii) if the interest payment is not made when due,
the date on which the interest payment is made.
Also pursuant to the Debenture, the Company has the right to redeem, by
giving 3 days' written notice to the Investor, a portion or all of the Debenture
then outstanding by paying an amount equal to one hundred five percent (105%) of
the amount redeemed plus interest accrued thereon. In the event that the Company
redeems only a portion of the outstanding principal amount of the Debenture, the
Investor may convert all or any portion of the unpaid principal or interest of
the Debenture not being redeemed by the Company. Additionally, if after the
earlier to occur of (x) fifteen (15) months following the date of the purchase
of the Debenture or (y) twelve (12) months following the date on which the
initial registration statement is declared effective, all or any portion of the
Debenture remains outstanding, then the Company, at the request of the Investor,
shall redeem such amount outstanding at the rate of five hundred thousand
dollars ($500,000) per each 30-day period. Finally, upon the occurrence of an
event of default as defined in the Debenture, the Investor can convert all
outstanding principal and accrued interest under this Debenture irrespective of
any of the limitations set forth in the Debenture and/or the Purchase Agreement,
and in such event, all such principal and interest shall become immediately due
and payable.
In connection with the Purchase Agreement, the Company and the Investor
entered into an investor registration rights agreement (the "Registration Rights
Agreement"), pursuant to which, the Company agreed to file, within 120 days of
the closing of the purchase of the Debenture, a registration statement to
register the resale of shares of the Company's common stock issuable to the
Investor upon conversion of the Debenture. The Company agreed to register the
resale of up to 100,000,000 shares, and to keep such registration statement
effective until all of the shares issuable upon conversion of the Debenture have
been sold. In the event that the Company issues more than 100,000,000 shares of
its common stock, it will file additional registration statements as necessary.
The Company and the Investor also entered into a security agreement
(the "Security Agreement"), pursuant to which the Company pledged all of its
property, including goods; inventory; contract rights and general intangibles;
documents, receipts, and chattel paper; accounts and other receivables; products
and proceeds; and any interest in any subsidiary, joint venture, or other
investment interest to secure the Company's obligation under the Debenture and
the related agreements.
3
The Company and the Investor also entered into an escrow agreement (the
"Escrow Agreement") relating to the holding and disbursement of payment of the
purchase price of the Debenture and cash payments made by the Company in payment
of the obligations owing under the Debenture. The Company and the Investor
appointed David Gonzalez as the Escrow Agent under the Escrow Agreement.
As of the date of this Current Report, no amount of the Debenture had
been converted and no shares of the Company's common stock had been issued to
the Investor. The Company sold the Debenture without registration under the
Securities Act of 1933, as amended (the "1933 Act") in reliance on Section 4(2)
of the 1933 Act, and the rules and regulations promulgated thereunder. Upon
future conversions, if any, of the Debenture into shares of the Company's common
stock, the Company intends to issue the shares without registration under the
1933 Act in reliance on Section 4(2) of the 1933 Act, and the rules and
regulations promulgated thereunder. As noted above, the Company anticipates that
any resales by the Investor of the shares issued upon conversion of the
Debenture will be made pursuant to a registration statement to be filed by the
Company.
Item 1.02 Termination of a Material Definitive Agreement
On May 26, 2005, the Company also entered into a termination agreement
(the "Termination Agreement") with Cornell to terminate the Standby Equity
Distribution Agreement (the "SEDA"), dated as of May 12, 2004, together with the
related registration rights agreement, escrow agreement, and placement agent
agreement. The Company and Cornell agreed that none of the parties to those
agreements would have any rights or obligations under the agreements, except
that any fees previously paid would be retained by the recipient. The Company
did not receive any funds in connection with the SEDA and did not issue any
shares of stock in connection with the SEDA.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements. None.
(b) Pro Forma Financial Information. Not Applicable.
(c) Exhibits.
99.1 Securities Purchase Agreement between CirTran Corporation and
Highgate House Funds, Ltd., dated as of May 26, 2005.
99.2 Form of 5% Convertible Debenture, due December 31, 2007, issued
by CirTran Corporation.
99.3 Investor Registration Rights Agreement between CirTran
Corporation and Highgate House Funds, Ltd., dated as of May 26,
2005.
99.4 Security Agreement between CirTran Corporation and Highgate House
Funds, Ltd., dated as of May 26, 2005.
4
99.5 Escrow Agreement between CirTran Corporation, Highgate House
Funds, Ltd., and David Gonzalez dated as of May 26, 2005.
99.6 Termination Agreement between CirTran Corporation and Cornell
Capital Partners, LP, dated as of May 26, 2005.
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.
CirTran Corporation
Date: June 3, 2005 By: /s/ Iehab Hawatmeh
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Iehab J. Hawatmeh, President