sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 3, 2006
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CEPTOR CORPORATION
(Exact Name of Registrant as Specified in Charter)
DELAWARE 333-105793 11-2897392
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
200 International Circle, Suite 5100, Hunt Valley, Maryland 21030
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (410) 527-9998
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
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 MATERIAL DEFINITIVE AGREEMENT.
On May 3, 2006, we entered into a term sheet with Margie Chassman (the "Term
Sheet") in connection with a private offering of our one-year 6% convertible
notes in an aggregate principal amount of up to $6,000,000 (the "Notes"). The
following summary of the Term Sheet is qualified in its entirety by the full
text of the Term Sheet, which has been filed as Exhibit 10.1 to this Current
Report. The terms of the Notes are summarized below:
MATURITY: The Notes are payable one-year after the date of funding, or earlier
upon acceleration following the occurrence of an "Event of Default", as defined
in the Notes.
INTEREST: Interest on the notes will accrue from the date of issue at 6% per
annum, or 12 % per annum upon the occurrence of an Event of Default.
OUR RIGHT OF REPURCHASE: We may repurchase the Notes for 200% of their principal
amount, plus accrued interest, on or before September 30, 2006, upon 30 days'
prior written notice.
OUR OBLIGATION TO REPURCHASE UPON A SALE OR MERGER: We must repurchase the Notes
at 200% of their principal amount, plus accrued interest, if on or before
September 30, 2006, we announce a sale or merger of our company or its assets,
which is completed within six months.
CONVERSION INTO COMMON STOCK: The principal of, and accrued interest on, the
Notes is convertible into shares of our common stock, par value $0.0001 (the
"Common Stock"), at the option of the holders of the Notes, at an initial
conversion price per share of $0.15, subject to adjustment for certain issuances
or events that will result in dilution (the "Fixed Conversion Price"). If the
Notes have not been fully converted or repurchased by us for 200% of their
principal amount by September 30, 2006, then commencing on October 1, 2006, the
conversion price will be the lesser of the Fixed Conversion Price and the
Floating Conversion Price. The "Floating Conversion Price" is defined as 90% of
the lowest closing price (or, if no closing price is available, the average of
closing bid and asked prices) for the 20 trading days immediately preceding the
date on which the notice of conversion is sent to us.
As an inducement to the purchase of the Notes, we will issue to purchasers of
the Notes who purchased shares of our Series A Convertible Preferred Stock
("Preferred Stock"), a number of additional shares of our Common Stock upon
conversion of the Preferred Stock, based upon the principal amount of Notes
purchased relative to the total purchase price of the shares of Preferred Stock
originally purchased, which will effectively reduce the per share conversion
price of the Preferred Stock so that it is the same as the conversion price per
share of the Notes, or to the extent purchasers have converted shares of
Preferred Stock, but not sold the Common Stock received upon conversion, we will
issue a number of additional shares of Common Stock that will provide equivalent
value, in each case without additional consideration. We also will reduce to
$0.30 the per share exercise price of warrants purchasers of the Notes received
with their purchase of Preferred Stock, to the extent of the principal amount of
Notes purchased relative to the total purchase price for the original shares of
Preferred Stock, subject to our right, after the registration statement referred
to below under the heading "Registration of Shares" has become effective, to
force the exercise of those warrants on 20 days' notice by offering to purchase
those warrants for a nominal price if the closing market price per share of the
Common Stock exceeds $0.45 for ten consecutive trading days. We also will issue
warrants to purchase a number of additional shares of our Common Stock at $0.15
per share that will provide equivalent value to those purchasers of Notes who
have sold or otherwise disposed of shares of Preferred Stock.
Purchasers of Notes who have not purchased shares of our Preferred Stock will
receive, without additional consideration, five-year warrants (the "Warrants")
to purchase a number of additional shares of our Common Stock equal to 100% of
the number of shares that the purchaser may acquire upon conversion of the Notes
at $0.15 per share. The initial exercise price of the Warrants is $0.30 per
share, subject to adjustment for certain issuances and events that will result
in dilution.
Registration of Shares
We have agreed to file a registration statement to register for resale the
shares of our Common Stock that purchasers of Notes may acquire upon conversion
of the Notes and or exercise of the Warrants, as well as any additional shares
of Common Stock which may be issued as part of the offering. If we fail to file
a registration statement for the resale of these shares by July 19, 2006, or the
registration statement is not effective by September 20, 2006, we will be
obligated to pay purchasers of the Notes liquidated damages in an amount equal
to 2% of the principal amount of the Notes for each month, or portion of a
month, for which we fail to timely file the registration statement or until the
registration statement becomes effective, but in no event may the liquidated
damages exceed 18% of the principal amount of the Notes. As a condition to their
purchase of the Notes, purchasers will be required to enter into agreement with
us that they will not sell, transfer or otherwise dispose of any of our
securities prior to August 31, 2006.
Monthly Disbursement of Proceeds
The proceeds of the offering will be disbursed to us from escrow monthly, to the
extent available, as follows: $600,000 by May 10, 2006 and an additional
$500,000 by the 10th day of each succeeding calendar month until fully funded.
We will pay Margie Chassman, for her efforts in connection with the offering, a
yield maintenance fee of 10% of the gross proceeds of the offering, plus issue
to her for a nominal consideration five-year warrants to purchase 10% of the
shares issuable upon conversion of the Notes and 10% of the shares of Common
Stock that may be acquired upon exercise of the Warrants, for an exercise price
equal to the purchase price paid by purchasers of the Notes. Ms. Chassman has
agreed to pledge our convertible note in the principal amount of $250,000 to
secure her non-recourse obligation to increase the return to purchasers of our
Preferred Stock to the extent required so that investors' avoid a loss on their
investment, measured on the earlier of April 20, 2007 or the date on which all
of the Notes offered are sold or otherwise disposed of, including by conversion.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT
The information reported in Item 1.01 is incorporated by reference into
this Item 2.03.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
Exhibit No. Description
10.1 Term Sheet dated May 3, 2006 between CepTor Corporation and
Margie Chassman
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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.
CEPTOR CORPORATION
Date: May 9, 2006
By: /s/ William H. Pursley
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William H. Pursley
Chairman and Chief Executive Officer