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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 12, 2005
XsunX, Inc.
(Exact name of registrant as specified in its charter)
Colorado 000-29621 84-1384159
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
165 Enterprise, Aliso Viejo, California 92656
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(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code (949) 330-8060
Copies to:
Greg Sichenzia, 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))
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Item 1.01 Entry into a Material Definitive Agreement.
On December 12, 2005, XsunX, Inc. (the "Company") consummated a Securities
Purchase Agreement (the "Purchase Agreement") dated December 12, 2005 with
Cornell Capital Partners L.P. ("Cornell") providing for the sale by the Company
to Cornell of its 10% secured convertible debentures in the aggregate principal
amount of $5,000,000 (the "Debentures") of which $2,000,000 was advanced
immediately. The second installment of $2,000,000 will be advanced immediately
prior to the filing by the Company with the Securities and Exchange Commission
(the "Commissions") of the Registration Statement (as defined below). The last
installment of $1,000,000 will be advanced three days prior to the date the
Registration Statement is declared effective by the Commission.
The Debentures mature on the third anniversary of the date of issuance (the
"Maturity Date") and the Company is not required to make any payments until the
Maturity Date.
Holders (the "Holders") of the Debentures may convert at any time amounts
outstanding under the Debentures into shares of Common Stock of the Company (the
"Common Stock") at a conversion price per share equal to the lesser of $0.38 or
95% of the lowest daily volume weighted average price of the Common Stock, as
quoted by Bloomberg, LP, for the 30 trading days immediately preceding the date
of conversion (the "Variable Market Price"). Unless waived by the Company, the
Holders may not, together with their affiliates, convert more than an aggregate
of $350,000 in any 30-day period of principal amount of the Debentures at the
Variable Market Price. Cornell has agreed not to short any of the shares of
Common Stock
The Company has the right to redeem a portion or all amounts outstanding under
the Debenture prior to the Maturity Date at a 15% redemption premium provided
that the closing bid price of the Common Stock is less than $0.38.
Under the Purchase Agreement, the Company also issued to Cornell five-year
warrants to purchase 3,125,000 and 1,250,000 shares of Common Stock at $0.45 and
$0.55, respectively (collectively, the "Warrants").
In connection with the Purchase Agreement, the Company also entered into a
registration rights agreement (the "Registration Rights Agreement") providing
for the filing of a registration statement (the "Registration Statement") with
the Securities and Exchange Commission registering the Common Stock issuable
upon conversion of the Debentures and exercise of the Warrants. The Company is
obligated to use its best efforts to cause the Registration Statement to be
declared effective no later than April 11, 2006 and to insure that the
registration statement remains in effect until all of the shares of common stock
issuable upon conversion of the Debentures and exercise of the Warrants have
been sold. In the event of a default of its obligations under the Registration
Rights Agreement, including its agreement to file the Registration Statement
with the Securities and Exchange Commission no later than January 11, 2006, or
if the Registration Statement is not declared effective by April 11, 2006, it is
required pay to Cornell, as liquidated damages, for each month that the
registration statement has not been filed or declared effective, as the case may
be, either a cash amount or shares of our common stock equal to 2% of the
liquidated value of the Debentures.
Prior to executing the Purchase Agreement, the Company had withdrawn the
registration statement that included Common Stock issued to Cornell and Common
Stock to be issued upon the conversion of debentures and the exercise of
warrants previously sold to Cornell (collectively, the "Initial Securities")
pursuant to a securities purchase agreement executed on July 14, 2005 (the
"Prior Agreement") as well as Common Stock to be issued pursuant to the Standby
Equity Distribution Agreement dated July 14, 2005 between the Company and
Cornell (the "Distribution Agreement"). All Initial Securities will be included
in the Registration Statement. The Company and Cornell also agreed to terminate
the Distribution Agreement.
The Company's obligations under the Prior Agreement and the Purchase Agreement
are secured by substantially all of the Company's assets. As further security
for its obligations thereunder, the Company has deposited into escrow 26,798,418
shares of Common Stock. In addition, Tom Djokovich, the Company's Chief
Executive Officer, has granted a security interest in 925,000 shares of Common
Stock that he owns to secure the Company's obligations under the Prior Agreement
only.
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 for a description of a secured loan obligation by the Company.
Item 3.02 Unregistered Sales of Equity Securities.
See Item 1.01 above for a description of the transactions pursuant to which the
Company issued Debentures and Warrants. All securities were issued pursuant to
Rule 506 of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Act"), and/or Section 4(2) of the Act.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
Exhibit
Number Description
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4.1 Convertible Debenture dated December 12, 2005
4.2 Form of $0.45 Warrant
4.3 Form of $0.55 Warrant
10.1 Securities Purchase Agreement dated December 12, 2005 between the
Company and Cornell
10.2 Investor Registration Rights Agreement dated December 12, 2005
10.3 Amended and Restated Pledge and Escrow Agreement dated December 12,
2005 by and among the Company, Cornell and David Gonzalez as escrow
agent
10.4 Amended and Restated Security Agreement dated December 12, 2005 by
and between the Company and Cornell
10.5 Escrow Agreement Dated December 12, 2005 by and among the Company.
Cornell and David Gonzalez, as Escrow Agent
10.6 Irrevocable Transfer Agent Instructions
10.7 Termination Agreement dated December 12, 2005 between the Company
and Cornell.
99.1 Press Release
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.
XsunX, Inc.
By: /s/ Tom Djokovich
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Chief Executive Officer
Date: December 12, 2005