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): DECEMBER 19, 1997
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C-PHONE CORPORATION
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(Exact name of registrant as specified in its charter)
NEW YORK 0-24424 06-1170506
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(State or Other Jurisdiction (Commission) (IRS Employer
of Incorporation) File Number) Identification No.)
6714 NETHERLANDS DRIVE, WILMINGTON, NORTH CAROLINA 28405
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (910) 395-6100
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
DECEMBER 1997 PRIVATE PLACEMENT
On December 19, 1997, C-Phone Corporation (the "Company") completed a
private placement (the "December Placement") pursuant to which the Company
issued to several investors an aggregate of (a) 4,500 shares (the "Preferred
Shares") of the Company's newly created Series A Convertible Preferred Stock,
par value $.01 per share (the "Series A Preferred Stock") with an initial stated
value of $1,000 per share (which increases at the rate of 5% per annum) (such
amount, as increased from time to time, the "Stated Value"), (b) warrants (the
"One-Year Warrants") to acquire up to an aggregate of 315,000 shares of common
stock, par value $.01 per share, of the Company ("Common Stock"), and (c)
warrants (the "Three-Year Warrants" and with the One-Year Warrants,
collectively, the "Warrants") to acquire up to an aggregate of 135,000 shares of
Common Stock, for an aggregate purchase price of $4,500,000, before payment of
fees and expenses.
Each Preferred Share is convertible, from time to time in whole or in
part at the option of the holder, into such number of shares of Common Stock as
is determined by dividing the Stated Value by the lesser of (a) $7.3575, and (b)
85% of the average of the closing bid price during such three consecutive
trading day period as may be selected by the holder during the 25 trading day
period preceding the date of conversion. The Preferred Shares cease to be
convertible (the "19.99% Limitation") if, at any time the aggregate number of
shares of Common Stock then issued upon conversion of the Preferred Shares would
equal 1,068,500 shares of Common Stock (the remaining shares of Common Stock
then issuable upon conversion of the Preferred Shares being the "Excess
Shares"), unless, in accordance with the rules of The Nasdaq Stock Market, Inc.
("Nasdaq") (on which the Common Stock is traded), the Company has obtained
approval for the issuance of the Excess Shares by a majority of the total votes
cast on such proposal by the holders of the then outstanding Common Stock (not
including any shares of Common Stock held by present or former holders of the
Preferred Shares that were issued upon conversion of the Preferred Shares), or
it has otherwise obtained permission from Nasdaq to allow such issuances. Any
outstanding Preferred Shares on December 19, 1999 automatically will be
converted into Common Stock at the conversion price then in effect.
The Company has agreed that, without the consent of the holders of 2/3
of the then outstanding Preferred Shares, it will not (a) issue any other class
or series of preferred stock that would rank senior to the Series A Preferred
Stock, and (b) on or before December 19, 1998, issue any other class or series
of preferred stock that would rank pari passu with the Series A Preferred Stock,
in either case, as to distribution of assets
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upon liquidation.
The One-Year Warrants expire on December 19, 1998 and have an exercise
price of $8.05 per share (115% of the closing price of the Common Stock on the
Nasdaq National Market (the "NNM") on the trading day immediately preceding the
closing date of the December Placement), subject to adjustment under certain
circumstances, including upon the issuance of shares of Common Stock (or
securities convertible or exchangeable into shares of Common Stock) at less than
80% of the then market price on the NNM for the Common Stock. The One-Year
Warrants are redeemable at the option of the Company at a price of $.01 per
warrant if the closing price of the Common Stock on the NNM is greater than 130%
of the exercise price of the One-Year Warrants then in effect for 10 consecutive
trading days. The Three-Year Warrants expire on December 19, 2000 and have an
exercise price of $9.10 per share (130% of the closing price of the Common Stock
on the NNM on the trading day immediately preceding the closing date of the
December Placement), subject to adjustment under certain circumstances,
including upon the issuance of shares of Common Stock (or securities convertible
or exchangeable into shares of Common Stock) at less than 80% of the then market
price on the NNM for the Common Stock. The Three-Year Warrants are not
redeemable.
The Company has agreed, at its expense, (a) to prepare and deliver to
the holders of the Preferred Shares on or before January 18, 1998, a draft
registration statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933 (the "1933 Act") with respect to the shares of Common
Stock issuable upon conversion of the Series A Preferred Stock and exercise of
the Warrants (collectively, the "Registrable Securities"), (b) to file the
Registration Statement within 10 days after receipt of comments from the holders
of the Preferred Shares and thereafter use its best efforts to have the
Registration Statement declared effective by the Securities and Exchange
Commission, and (c) use its best efforts to maintain the effectiveness of the
Registration Statement until the earlier of (i) December 19, 2001, or (ii) the
time that all the Registerable Securities have been sold pursuant to the
Registration Statement or may be sold under 1933 Act Rule 144 without regard to
the volume limitations thereof.
The Preferred Shares are subject to redemption at the option of a
holder if, among other things, (a) the Company fails to obtain effectiveness of
the Registration Statement by June 17, 1998 or if, after the Registration
Statement becomes effective, such effectiveness lapses for more than 30
consecutive days or more than 60 days in any 12 month period, (b) the Company
fails to maintain the listing of the Common Stock on the NNM or another
principal securities exchange or automated quotation system and such failure
continues for more that 30 days, or (c) the
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Preferred Shares cease to be convertible as a result of the 19.99% Limitation
and the Company has not, prior thereto, or within 75 days after notice from
holders of 2/3 of the Preferred Shares, obtained approval to issue additional
shares of Common Stock.
Other than as required by the New York Business Corporation Law, the
holders of the Preferred Shares do not have any voting rights except that,
without the consent of the holders of 2/3 of the Preferred Shares, the Company
may not take any action to adversely effect the rights of such holders.
The Company has agreed to pay certain penalties to the holders of the
Preferred Shares in the event that the Company (a) fails to cause timely
delivery of the Common Stock issuable upon conversion of the Preferred Shares,
(b) is unable to convert Preferred Shares into Common Stock because the Company
does not have a sufficient number of authorized but unissued shares available
for issuance therefor, (c) fails to obtain effectiveness of the Registration
Statement within 90 days of the filing thereof with the SEC or if, after the
Registration Statement becomes effective, such effectiveness lapses for more
than 15 consecutive days or more than 30 days in any 12 month period, or (d)
fails to maintain the listing of the Common Stock on the NNM or other principal
securities exchange or automated quotation system on which the Common Stock is
then trading, and such failure continues for more than 10 days.
In connection with the December Placement, the Company paid a finders
fee of $295,000 and issued to an affiliate of the finder One-Year Warrants to
acquire an aggregate of 180,000 shares of Common Stock. The shares of Common
Stock issuable upon exercise of such One-Year Warrants will be included in the
Registration Statement.
Each participant in the December Placement was responsible for its own
costs and expenses.
The securities in the December Placement were offered for sale, and
were sold, without registration thereof under the 1933 Act, pursuant to the
exemption from registration provided by Regulation D under the 1933 Act.
The foregoing summaries of agreements are necessarily incomplete and
selective, and are qualified in their entirety by reference to the agreements
summarized, each of which is attached hereto as an exhibit.
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AGREEMENT WITH SPRINT
On December 16, 1997, the Company announced that it had signed an
agreement with Sprint Corp. to supply C-Phone consumer video technology. A copy
of such announcement is attached hereto as an exhibit.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
1. Form of Securities Purchase Agreement, dated as of December 17,
1997, between C-Phone Corporation and each purchaser party thereto.
2. Certificate of Amendment of the Certificate Of Incorporation of
C-Phone Corporation, as filed with the Department of State of the State of New
York on December 18, 1997.
3. Form of Registration Rights Agreement, dated December 19, 1997,
between C-Phone Corporation and each purchaser party thereto.
4. Form of One-Year Warrant, dated December 19, 1997, of C-Phone
Corporation.
5. Form of Three-Year Warrant, dated December 19, 1997, of C-Phone
Corporation.
6. Press Release, dated December 16, 1997, of C-Phone Corporation.
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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.
C-PHONE CORPORATION
By: /s/ DANIEL P. FLOHR
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Daniel P. Flohr
President and Chief
Executive Officer
Date: December 31, 1997
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