UNITED STATES
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): October 27, 1997
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fonix corporation
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
0-23862 22-2994719
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(Commission file number) (I.R.S. Employer Identification No.)
1225 Eagle Gate Tower, 60 East South Temple Street
Salt Lake City, Utah 84111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 328-0161
Not Applicable
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(Former name or former address, if changed since last report)
1
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ITEM 5. OTHER EVENTS
In June 1997, the Company entered into a Convertible Debenture
Purchase Agreement (the "Agreement") whereby an unrelated investment entity
(the "Investor") agreed to purchase up to an aggregate principal amount of
$10,000,000 of the Company's Series B 5% Convertible Debentures (the
"Debentures"). The Debentures were due June 18, 2007, were to bear interest
at 5% per annum and were to be convertible into shares of the Company's
common stock at anytime after issuance at the holder's option. Under terms
of the Agreement, the Debentures were to be purchased in three payments.
The first payment of $3,000,000 was made to the Company on June 18, 1997,
in return for which the Company issued a corresponding principal amount of
Debentures to the Investor. The second and third payments of $3,000,000
and $4,000,000, respectively, were to be paid to the Company at specified
times and upon written notice, provided that the Company's market
capitalization is in excess of $200,000,000 and other conditions were met.
The Debentures were convertible into shares of the Company's common stock
at the lesser of $6.81 per share or the average of the per share market
value for the five trading days immediately preceding the conversion date
multiplied by 90% for any conversion on or prior to the 120th day after the
original issue date and 87.5% for any conversion thereafter. As part of
the same transaction, the Company also issued to the Investor a warrant
(the "Initial Debenture Warrant") to purchase up to 250,000 shares of common
stock at any time prior to June 18, 2002, at the exercise price of $8.28
per share. Additionally, the Company entered into a registration rights
agreement with the investor under which the Company is contractually
obligated to take steps to register the common stock issuable upon
conversion of the Debentures and exercise of the Initial Debenture Warrant.
The registration statement was filed with the Securities and Exchange
Commission on July 16, 1997. The Company covenanted in the debentures and
the warrant to reserve out of its authorized and unissued shares of common
stock no less than that number of shares that would be issuable upon the
conversion of the debentures and any interest then payable on the
debentures and the exercise of the warrant.
Subsequent to June 18, 1997, all of the Debentures issued upon the
Investor's initial $3,000,000 payment were converted into shares of the
Company's common stock according to the formula described above.
Effective September 30, 1997, before the Investor had paid any
additional investment amounts under the Agreement, the Company and the
Investor entered into a written amendment agreement (the "Amendment
Agreement") which modified the Agreement such that, rather than issuing
additional Debentures upon payment of any additional amounts by the
Investor, the Company would issue shares of its Convertible B Convertible
Preferred Stock (the "Series B Preferred") having conversion rights
essentially identical to the Debentures. Each share of the Series B
Preferred has a "stated value" of $20 on which the Company is obligated to
pay interest in cash or shares of its common stock, at the Company's
option, at the rate of 5% per annum. In consideration for the Investor's
agreement to enter into the Amendment Agreement, upon closing thereof, and
as part of the same transaction, the Company issued to the Investor
warrants (the "Modification Warrants") to purchase up to (i) 175,000 shares
of Common Stock on the Closing Date, (ii) 10,000 shares of Common Stock 6
months from the Closing Date for (a) every 50,000 shares of Series B
Preferred and (b) Underlying Shares then held by the Purchaser having an
aggregate per share market value of $1,000,000, and (iii) 30,000 shares of
Common Stock 12 months from the Closing Date for (a) every 50,000 shares of
Series B Preferred and (b) Underlying Shares having an aggregate per share
market value of $1,000,000. The Modification Warrants shall have a per
share exercise price equal to 125% of the average price per share of Common
Stock for the 5 Trading Days immediately preceding the date of issuance,
and shall have a term of 5 years from the date of issuance.
Also effective September 30, 1997, the Company entered into a
Convertible Preferred Stock Purchase Agreement (the "Series C Agreement")
with another investor (the "Series C Investor"). Pursuant to the Series C
Agreement, the Series C Investor agreed to purchase, and the Company agreed
to issue and sell, a total of 187,500 shares of the Company's Series C 5%
Preferred Stock (the "Series C Preferred"), each share having a stated value
of $20 per share for an aggregate purchase price of U.S. $3,750,000. As
part of the same transaction, the Company will issue to the Series C
Investor warrants (the "Series C Warrants") to purchase up to 200,000 shares
of the Company's common stock at any time after the issuance of the Series
C Warrants at a per share exercise price that represents 125% of the
average market price as determined in accordance with the terms of the
Series C Agreement and as of the date of issuance, and which Series C
Warrants shall expire three (3) years from the date of issuance.
In connection with the foregoing transactions, the which will be
discussed in more detail in the Company's forthcoming Quarterly Report on
Form 10-Q for the period ended September 30, 1997, the Company hereby files
the accompanying actual and pro forma financial information.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Unaudited Actual and Pro Forma Balance Sheet of fonix
corporation as of September 30, 1997.
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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 thereunto duly authorized.
fonix corporation
By: /s/ Roger D. Dudley
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Roger D. Dudley
Executive Vice President
By: /s/ Douglas L. Rex
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Douglas L. Rex
Chief Financial Officer
(Principal Accounting Officer)
Date: October 27, 1997
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fonix corporation
[A Development Stage Company]
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
Actual Pro Forma
September 30, September 30,
1997 1997
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,967,309 $ 22,467,309
Notes receivable 250,000 250,000
Interest receivable - -
Prepaid assets 156,861 156,861
Stock subscription receivable 3,794,500 3,794,500
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Total Current Assets 24,168,670 26,668,670
Equipment, net of accumulated depreciation of $315,727 and $80,232 1,669,848 1,669,848
Intangible assets, net of accumulated amortization of $6,459 and $3,107 125,755 125,755
Other assets 49,332 49,332
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$ 26,013,605 $ 28,513,605
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</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Accounts payable $ 348,801 $ 348,801
Accrued expenses 811,081 811,081
Convertible debenture - -
Accrued expenses - related party 406,765 406,765
Notes payable - related party 760,000 760,000
Notes payable 19,729,995 19,729,995
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Total Current Liabilities 22,056,642 22,056,642
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Stockholders' equity:
Preferred stock 46 59
Common stock 4,229 4,229
Additional paid-in capital 30,880,040 33,713,360
Paid-in capital in excess of par value-preferred stock 6,596,519 6,721,519
Accumulated deficit (33,523,871) (33,982,204)
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Total stockholders' equity 3,956,963 6,456,963
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$ 26,013,605 $ 28,513,605
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</TABLE>
The pro forma September amounts include the issuance of 125,000 shares of
preferred stock for $2,500,000 to an Investor under an agreement closed
10/29/97
