SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 1, 1997
FORTUNE NATURAL RESOURCES CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 1-12334 95-4114732
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
515 W. Greens Road, Suite 720, Houston, Texas 77067
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 872-1170
Registrant's telecopier number, including area code: (281) 872-1213
N/A
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On October 14, 1997, Fortune Natural Resources Corporation ("Fortune"
or "the Company") commenced a private placement of up to $4.5 million of 12%
Convertible Subordinated Notes due December 31, 2007 (the "Notes"). The private
placement closed on December 1, 1997. An aggregate of $3,225,000 principal
amount of Notes was sold, and the Company received $2,815,000 of net proceeds
after offering expenses and commissions.
The Notes are convertible into the Company's Common Stock at a
conversion price of $3.00 per share, subject to adjustment. The Notes are
convertible by the holders after May 1, 1999, subject to a one-time option by
the holders to convert at a lower conversion price prior to that date in the
event that the Company sells shares of its Common Stock at a price below the
conversion price. The Notes are redeemable by the Company after May 1, 1999, at
a premium that reduces monthly from 10% to zero over an 18-month period. Any
such premium on redemption is waived in the event that the Company's Common
Stock price averages at least $4.50 per share for 30 consecutive trading days.
The holders of the Notes will be entitled to receive additional shares upon
conversion in the event that the Company's Common Stock price averages less than
the conversion price for a certain period prior to May 1, 1999. The Notes are
subordinate to all of the Company's secured debt, including the credit facility
with Credit Lyonnais. The Notes bear interest at a rate of 12% per year, payable
quarterly.
The net proceeds of the private placement are being used to refinance
existing debt and for general corporate purposes. On December 5, 1997, the
Company redeemed the remaining outstanding balance of $1,028,000 of the
Company's Debentures due December 31, 1997. In addition, $315,000 of net
proceeds were used to reduce the borrowings under the Company's credit facility
with Credit Lyonnais. At the date hereof, the outstanding principal balance of
the credit facility is $550,000.
The Notes were sold under a placement agreement with J. Robbins
Securities, L.L.C. (the "Placement Agent"). The Placement Agent received a ten
percent sales commission, a three percent non-accountable expense allowance, and
warrants to purchase 89,583 shares of Common Stock. The warrants are exercisable
over a five-year period at $3.60 per share. Barry W. Blank, a beneficial owner
of more than five percent of the Company's Common Stock, is a branch manager for
the Placement Agent and marketed substantially the entire private placement. As
such, Mr. Blank earned approximately 50% of the fees and commissions paid to the
Placement Agent for the Notes sold by him and 20% of the warrants to be issued
to the Placement Agent. A trust established by and, under certain circumstances,
for the benefit of Mr. Blank acquired $500,000 of the Notes and Mr. Blank's
mother acquired $50,000 of Notes. Mr. Blank disclaims beneficial ownership of
the Notes purchased by his mother. Barry Feiner, a director of the Company,
acted as outside counsel for the Placement Agent in connection with the private
placement and earned $32,250 in legal fees from the Placement Agent. Mr.
Feiner's wife acquired $50,000 in Notes for which Mr. Feiner disclaims
beneficial ownership. Mr. Feiner recused himself from voting on all Company
board of director matters associated with the private placement.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. Not applicable.
(b) Pro forma financial information. Not applicable.
(c) Exhibits.
Exhibit No. Description
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1.1* Placement Agent Agreement between
Registrant and J. Robbins Securities,
L.L.C., including amendments thereto.
4.1* Form of Note between Registrant and holders of
12% Convertible Subordinated Notes.
4.2* Form of Placement Agent Warrant Agreement between
Registrant and J. Robbins Securities, L.L.C.
10.1* Amendment dated November 3, 1997 to Credit
Agreement between Registrant and Credit
Lyonnais New York Branch and Certain
Lenders.
10.2* Form of Subscription Agreement and
Investment Letter in connection with
private placement of 12% Subordinated
Convertible Notes due December 31, 2007.
*Previously filed with Form 10-Q for period ending 9/30/97.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FORTUNE NATURAL RESOURCES CORPORATION
By: /s/ Tyrone J. Fairbanks
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Tyrone J. Fairbanks
President and Chief Executive Officer
Date: December 15, 1997
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