UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
February 8, 2006
Homeland Security Capital Corporation
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(Exact Name of Registrant as Specified in Charter)
Delaware 814-00631 52-2050585
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4100 North Fairfax Drive, Suite 1150, Arlington, Virginia 22203-1664
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (703) 528-7073
Celerity Systems, Inc.
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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:
|_| Written 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.
Homeland Security Capital Corporation (the "Company") entered into an Investment
Agreement with Cornell Capital Partners, LP ("Cornell Capital"), dated as of
February 6, 2006, pursuant to which the Company will exchange with Cornell
Capital 1,000,000 shares of Series G Convertible Preferred Stock (the "Series G
Preferred Shares") for 450,000,000 shares of the Company's common stock, par
value $0.001 per share (the "Common Stock"), owned by Cornell Capital. Each
share of Series G Preferred Shares shall be convertible, at Cornell Capital's
discretion, into 450 shares of the Common Stock. The Series G Preferred Shares
are senior to all Common Stock and all series of preferred stock of the Company.
Each share of Series G Preferred Share will have a liquidation preference of
$0.10 plus any accrued and unpaid dividends. The holders of Series A Preferred
Shares are not entitled to receive any dividends. The Company will pay a $10,000
structuring fee to Yorkville Advisors Management, LLC in connection with the
transaction.
In connection with the Investment Agreement, the Company entered into an
Investor Registration Rights Agreement with the Cornell Capital pursuant to
which the company agreed to file a registration statement covering the resale of
shares of Common Stock issuable upon the conversion of the Series G Preferred
Shares. The Company also filed a Certificate of Designation with the State of
Delaware amending its certificate of incorporation to include the rights and
terms of the Series G Preferred Shares.
The foregoing is a summary of the terms and conditions of the Investment
Agreement, the Certificate of Designation and the Investor Registration Rights
Agreement and does not purport to be complete. The foregoing is also qualified
in its entirety by reference to the above-mentioned agreements, copies of which
are filed as exhibits to this Current Report on Form 8-K and are incorporated
herein by reference.
Also, see Item 2.03 below regarding the sale of the Company's Convertible
Debenture.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
The Company entered into a Securities Purchase Agreement with Cornell Capital,
dated as of February 6, 2006, which provided for the purchase by Cornell Capital
of a Convertible Debenture (the "Debenture") in the amount of $4,000,000, which
Debenture is convertible into Common Stock.
The conversion price of the Debenture shall be equal to the lesser of (1) $0.01
or (2) a ten percent discount to the lowest daily volume weighted average price
of the Common Stock for the thirty days preceding conversion. Cornell Capital
will be entitled to convert the Debenture at a conversion price into Common
Stock, provided that Cornell Capital cannot convert into shares of Common Stock
that would cause Cornell Capital to own more than 4.9% of the issued and
outstanding Common Stock.
The Debenture will bear interest at 5% per annum and the principal amount will
be payable on the third anniversary of the effective date of the Debenture. If
the Common Stock is trading below the conversion price, the Company may redeem
the Debenture at any time upon the payment of a redemption premium equal to
twenty percent of the amounts redeemed.
Pursuant to a Security Agreement between the Company and Cornell Capital, the
Company's obligations under the Debenture are secured by a pledge of all of its
assets.
Pursuant to the Securities Purchase Agreement, the Company will pay a commitment
fee of $400,000 and $20,000 in structuring fees and diligence fees, all to
Yorkville Advisors Management, LLC. Accordingly, the Company will receive net
proceeds of approximately $3,580,000 upon issuance of the Debenture. The Company
will also issue to Cornell Capital 50,000,000 shares of the Common Stock
pursuant to this transaction.
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In connection with the Securities Purchase Agreement, the Company entered into
an Investor Registration Rights Agreement with the Cornell Capital pursuant to
which Cornell Capital agreed to file a registration statement covering the
resale of shares of Common Stock issuable upon the conversion of the Debenture.
The foregoing is a summary of the terms and conditions of the Securities
Purchase Agreement, the Convertible Debenture, the Security Agreement and the
Investor Registration Rights Agreement and does not purport to be complete. The
foregoing is also qualified in its entirety by reference to the above-mentioned
agreements, copies of which are filed as exhibits to this Current Report on Form
8-K and are incorporated herein by reference.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.
On February 8, 2006, the Company issued the Debenture to Cornell Capital in the
amount of $4,000,000 that is convertible into Common Stock. In addition, on
February 8, 2006, the Company issued 1,000,000 shares of Series G Preferred
Shares that are convertible into Common Stock.
The Company granted Cornell Capital registration rights with respect to the
Common Stock underlying the Debenture and the Series G Preferred Shares.
Pursuant to the terms of the Investor Registration Rights Agreements, the
Company must prepare and file with the Securities and Exchange Commission a
registration statement covering the shares of Common Stock underlying the
Debenture and the Series G Preferred Shares. The Company also granted Cornell
Capital piggyback registration rights with respect to the shares of Common Stock
underlying the Debenture and the Series G Preferred Shares.
The transactions described in this Item 3.02 are exempt from registration
requirements pursuant to Section 4(2) and/or Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended. Also see Items 1.01
and 2.03 above.
ITEM 8.01. OTHER EVENTS.
On February 8, 2006, the Company issued a press release attached to this Current
Report on Form 8-K as Exhibit 99.1 which relates to the private placement under
the Securities Purchase Agreement and is hereby incorporated by reference.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibits:
3.1 Certificate of Designation for the Series G Convertible Preferred Stock
4.1 Form of Convertible Debenture due February 2009
10.1 Securities Purchase Agreement dated February 6, 2006 among Homeland
Security Capital Corporation and Cornell Capital Partners LP
10.2 Investor Registration Rights Agreement dated February 6, 2006 among
Homeland Security Capital Corporation and Cornell Capital Partners LP
10.3 Investment Agreement dated February 6, 2006 among Homeland Security Capital
Corporation and Cornell Capital Partners LP
10.4 Security Agreement dated February 6, 2006 between Homeland Security Capital
Corporation and Cornell Capital Partners, LP.
99.1 Press Release, dated February 8, 2006, announcing the transactions with
Cornell Capital Partners LP
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Current Report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: February 13, 2006 HOMELAND SECURITY CAPITAL CORPORATION
By: /s/ C. Thomas McMillen
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Name: C. Thomas McMillen
Title: President and Chief Executive Officer
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