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): June 17, 2005
Fellows
Energy Ltd.
(Exact
name of registrant as specified in its charter)
|
Nevada
|
000-33321
|
33-0967648
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer 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
June
17, 2005, Fellows Energy Ltd. (the “Company”) closed a financing pursuant to a
securities purchase agreement with three accredited investors for the issuance
of $5,501,199.95 in face amount of debentures maturing at the end of the
27th
month from the date of issuance, and three year warrants to purchase common
stock of the company. The debentures do not accrue interest and the investors
paid $3,849,685 for the debentures. A commission of 9% on the $3,849,685
was
paid by the Company to HPC Capital Management (a registered broker-dealer)
in
connection with the transaction, and the Company paid $30,000 of the investors’
counsel’s legal fees, resulting in net proceeds to the company of $3,403,267.35.
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 October 1,
2005,
which payment can be made in cash or in common stock of the Company. The
Company
may pay this amortization payment in cash or in stock at the lower of $0.60
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. In the
event that the Company makes the payment in cash, the company shall pay 110%
of
the monthly redemption amount.
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. At any time, the
debentures are convertible into common stock of the Company at the Set
Price.
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 June 17, 2008, to purchase
4,584,334 shares of restricted common stock, at a per share equal to 110%
of the
closing bid price for the company’s stock on June 16, 2005. 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
June
17, 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 250,000 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 90 days of closing 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 90 days of receipt a a written demand by the
investors 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.
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Exhibit
Number
|
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Description
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4.1
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Form
of Securities Purchase Agreement by and among Fellows Energy Ltd.
and the
investors.
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4.2
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Form
of Debenture.
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4.3
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Form
of Warrant.
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4.4
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Form
of Registration Rights Agreement by and among Fellows Energy Ltd.
and the
investors.
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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 hereunto
duly authorized.
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FELLOWS
ENERGY LTD. |
|
|
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| Date: June
20, 2005 |
By: |
/s/ GEORGE
S. YOUNG |
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|
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George
S. Young
Chief Executive
Officer
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