UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest reported): August 11, 2006
Manaris Corporation
(Exact name of registrant as specified in its charter)
Nevada 000-33199 88-0467848
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(State or other jurisdiction (Commission File No.) (IRS Employer ID)
of incorporation)
1155 Rene-Levesque Blvd. West
Suite 2720
Montreal, Quebec
Canada H3B 2K8
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(Address of principal executive offices and Zip Code)
(514) 337-2447
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(Registrant's telephone number, including area code)
Copies to:
Darrin Ocasio, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, NY 10018
Tel:(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))
Item 1.01 Entry Into a Material Definitive Agreement
On August 11, 2006, Manaris Corporation ("Manaris" or the "Company") entered
into a Note and Warrant Purchase Agreement (the "Purchase Agreement") providing
for the sale by the Company of Series B Subordinated Secured Convertible Notes
(the "Series B Notes") in an aggregate principal amount of approximately $3.6
million and Original Issue Discount Subordinated Secured Convertible Notes equal
to fifteen percent (15%) of the aggregate principal amount of Series B Notes
(the "OID Notes") (collectively, the "Notes") to certain institutional and
accredited investors (the "Investors"). Pursuant to the Purchase Agreement, the
Company also issued four year warrants to purchase shares of the Company's
common stock in an amount equal to 37.5% of the number of common shares
underlying the Series B Notes at $.45 per share (the "Series Z Warrants") and
2.5% of the number of common shares underlying the Series B Notes at $.65 per
share (the "Series Y Warrants") (collectively, the "Warrants").
Gross proceeds of approximately $1.6 million will be disbursed initially, to be
followed by a second disbursement of $500,000. The remaining $1.5 million will
be disbursed upon effectiveness of the Company's registration statement.
The Notes mature thirty (30) months from the date of issuance (the "Maturity
Date") and are convertible at any time into shares of the Company's common stock
at a fixed conversion price of $.42, subject to a conversion price reset of
$.35. The conversion price of the Notes is subject to adjustment for certain
events, including dividends, distributions or split of the Company's Common
Stock, or in the event of the Company's consolidation, merger or reorganization.
Beginning nine months from the issuance date, the Company is required to make
principal payments equal to one-eighth of the aggregate principal amount of the
Notes on a quarterly basis. The Company may pay the principal payment in either
cash plus a premium of 7% of each principal payment or in shares of registered
common stock at a 15% discount to the market price of the Company's common
stock.
The Company's obligations under the Purchase Agreement and the Notes are secured
by a subordinated lien on substantially all of the assets of the Company,
pursuant to a Pledge and Security Agreement.
In connection with the Purchase Agreement, the Company also entered into
registration rights agreements (the "Registration Rights Agreements") 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 Notes and exercise of the Warrants. The Company is
obligated to file the Registration Statement no later than 45 days from the date
of closing and to use its best efforts to cause the Registration Statement to be
declared effective no later than 120 days after filing and to insure that the
registration statement remains in effect until all of the shares of common stock
issuable upon conversion of the Notes and exercise of the Warrants have been
sold. In the event of a default of its obligations under the Registration Rights
Agreements, including its agreement to file the Registration Statement with the
Securities and Exchange Commission no later than 45 days from the date of
closing, or if the Registration Statement is not declared effective within 120
days of filing, it is required pay to the Investors, as liquidated damages, for
each month that the registration statement has not been filed or declared
effective, as the case may be, an amount or shares of our common stock equal to
1.5% of the amount invested, subject to a maximum of 12%.
In connection with the private placement, the Company has agreed to pay legal
and due diligence expenses of the investors in an amount not to exceed $43,000.
The Company has also agreed to pay an additional due diligence fee equal to the
lesser of 1.25% of the net financing proceeds or $75,000. In addition, Midtown
Partners LLC will receive aggregate placement agent fees of $349,771. Midtown
Partners and individuals affiliated with Midtown Partners will also receive the
following warrants to purchase shares of the Company's common stock in the
following aggregate amounts: 711,492 warrants exercisable at $.42 per share;
17,787 Series Y warrants, and; 266,810 Series Z warrants.
The Company claims an exemption from the registration requirements of the Act
for the private placement of these securities pursuant to Section 4(2) of the
Act and/or Regulation D promulgated thereunder since, among other things, the
transaction did not involve a public offering, the investors are accredited
investors and/or qualified institutional buyers, the investors had access to
information about the Company and their investment, the investors took the
securities for investment and not resale, and the Company took appropriate
measures to restrict the transfer of the securities.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
Exhibit Description
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10.1 Form of Note and Warrant Purchase Agreement
10.2 Form of Secured Promissory Note
10.3 Form of OID Note
10.4 Form of Pledge and Security Agreement
10.5 Form of Registration Rights Agreement
10.6 Form of Series Y Warrant
10.7 Form of Series Z Warrant
10.8 Deed of Hypothec
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.
MANARIS CORPORATION
Dated: August 17, 2006 By: /s/ John G. Fraser
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John G. Fraser
President and Chief
Executive Officer