UNITED STATES
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 (Earliest event reported): October 11, 2006
BIOPHAN TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Nevada 0-26057 82-0507874
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) file number) Identification No.)
150 Lucius Gordon Drive, Suite 215
West Henrietta, New York 14586
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(Address of principal executive offices) (Zip code)
(585) 214-2441
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(Registrant's telephone number (including area code)
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 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 October 11, 2006, we entered into a Securities Purchase Agreement (the
"Purchase Agreement") with ten private investors led by Iroquois Master Fund Ltd
("Iroquois").
Pursuant to the Purchase Agreement, on October 12, 2006, we issued $7,250,000
face amount of Senior Secured Convertible Notes (the "Notes") to the investors
and received proceeds of $6,670,000 after paying placement fees of $580,000. The
holders of the Notes may elect to convert the Notes at any time into shares of
our common stock based upon a price of $0.67 per share (the "Conversion Price").
Interest on the outstanding principal amount under the Notes is payable
quarterly at a rate equal to the six-month London InterBank Overnight Rate plus
500 basis points, with a minimum rate of 10% per annum and a maximum rate of 12%
per annum, payable at our option in cash or shares of our common stock
registered for resale under the Securities Act of 1933, as amended (the
"Securities Act"). If we elect to make an interest payment in common stock, the
number of shares issuable by us will be based upon the lower of (i) 90% of the
20-day trailing volume weighted average price per share as reported on Bloomberg
LP (the "VWAPS") or (ii) the Conversion Price. Principal on the Notes amortizes
and payments are due in 33 equal monthly installments commencing four months
following issuance of the Notes, and may be made at our option in cash or shares
of our common stock registered for resale under the Securities Act. If we elect
to make a principal payment in common stock, the number of shares issuable by us
will be based upon the lower of (i) 87.5% of the 15-day trailing VWAPS prior to
the principal payment date or (ii) the Conversion Price. Our obligations under
the Notes are secured by a first priority security interest in substantially all
of our assets pursuant to a Security Agreement dated as of October 11, 2006
between us and Iroquois, as agent for the investors (the "Security Agreement").
As further consideration to the investors, we issued one-year warrants to
purchase an aggregate of 10,820,896 shares of our common stock at a price of
$0.67 per share. If the investors elect to exercise these one-year warrants,
they will also receive additional five-year warrants to purchase shares of our
common stock equal to the number of shares purchased under the one-year
warrants, with 50% of the additional warrants having an exercise price of 115%
of the per share purchase price, and the remaining 50% of the additional
five-year warrants having an exercise price of 125% of the per share purchase
price. We also issued to the investors two series of five-year warrants to
purchase an aggregate of 10,820,896 shares of our common stock. The first
five-year warrants allow for the purchase of 5,410,498 shares of our common
stock at an exercise price of $0.81 per share, and the second five-year warrants
allow for the purchase of 5,410,498 shares of our common stock at an exercise
price of $0.89 per share. The warrants contain anti-dilution protection that
should we issue equity or equity-linked securities at a price per common share
below the exercise price of the five-year warrants, will automatically adjust
the exercise price of the warrants to the price at which we issue such equity or
equity-linked securities.
C.E. Unterberg, Towbin acted as the exclusive placement agent in the offering.
We have paid the placement agent a cash fee of $580,000 and issued to it a
five-year warrant to purchase an aggregate of 865,672 shares of our common stock
at a price of $0.67 per share.
We agreed to register for resale under the Securities Act the common stock
issuable upon the exercise of all of the warrants and any shares of common stock
that we may issue at our option to the holders of the Notes in connection with
payments of interest and principal, or that we are obligated to issue upon any
conversion of the Notes at the option of the holders. We further agreed to
propose to our shareholders an amendment to our Articles of Incorporation in
order to increase to at least 150,000,000 the number of authorized shares of our
common stock (the "Charter Amendment").
Our decision to enter into the Purchase Agreement was motivated, in part, by our
management's concerns regarding our Stock Purchase Agreement with SBI Brightline
XI, LLC ("SBI") dated May 27, 2005 and amended on January 8, 2006 (the "SBI
Agreement") for a $30,000,000 fixed price financing involving the sale to SBI of
up to 10,000,000 shares of our common stock We elected to sell the first tranche
of 1,000,000 shares at $2 per share on May 23, 2006; the funds from the sale of
the first tranche were received. We elected to sell the second tranche of
1,000,000 shares at $2 per share on July 21, 2006, but to date SBI has failed to
make payment in full as required under the SBI Agreement; $1,175,000 of the
funds from the sale of this tranche has been received but no shares have yet
been issued. On October 11, 2006, we delivered to SBI a notice of our election,
pursuant to the SBI Agreement, to sell to SBI the remaining eight tranches of
1,000,000 shares each (8,000,000 shares in the aggregate), for an aggregate
purchase price of $26,000,000; the notice also covered the second tranche of
1,000,000 shares, with respect to which SBI has not yet made payment in full.
Under the SBI Agreement, SBI is required to pay the full purchase price at a
closing on October 20, 2006. Management is concerned as to the viability of the
balance of the financing because of the disparity between the contractual strike
price under the SBI Agreement and the current market price for our shares, the
failure of SBI to meet in full its payment obligations with respect to the
second tranche and the potential reluctance of SBI to honor the new put.
In order to facilitate the transaction contemplated by the Purchase Agreement,
on October 11, 2006, we amended our January 24, 2006 Line of Credit Agreement
(the "Biomed Line of Credit Agreement") with Biomed Solutions, LLC, a New York
limited liability company ("Biomed") and the Convertible Promissory Note in the
original principal amount of $5,000,000 issued by us to Biomed on January 24,
2006 pursuant to the Biomed Line of Credit Agreement (the "$5,000,000 Biomed
Note"). The amendments reduce the price at which the $5,000,000 Biomed Note is
convertible into shares of our Common Stock from $1.46 per share to a conversion
price of $0.67, which is equal to the Conversion Price of the Notes issued under
the Purchase Agreement. The amendments also eliminate our obligation to draw
down the entire credit facility; the current outstanding principal balance on
the $5,000,000 Biomed Note is $3,930,000. In connection with the Purchase
Agreement, we also entered into a Subordination and Standstill Agreement (the
"Subordination Agreement") with Biomed and the investors who are parties to the
Purchase Agreement, pursuant to which Biomed agreed (i) to subordinate its
rights to payment under the $5,000,000 Biomed Note and the Convertible
Promissory Note in the original principal amount of $2,000,000 issued by us to
Biomed on May 27, 2005 (of which the current outstanding principal balance is
$500,000) to the rights of the investors under the Notes and (ii) to convert the
entire outstanding amount of principal and interest due under the $5,000,000
Biomed Note in excess of $700,000 into shares of our common stock upon the
effectiveness of the Charter Amendment. Michael L. Weiner, our President, CEO
and a member of our Board of Directors, is the Manager and, indirectly, a 24.3%
beneficial owner of Biomed. Mr. Weiner and Ross Kenzie, also a member of our
Board of Directors, make up the Biomed Board of Members.
In connection with the proposed Charter Amendment, we will call a Special
Meeting of our shareholders and, in connection therewith, will prepare a proxy
statement for our shareholders to be filed with the Securities and Exchange
Commission. Before making any voting or investment decision, our shareholders
are urged to read the proxy statement carefully in its entirety when it becomes
available because it will contain important information about the proposed
Charter Amendment. The proxy statement and other relevant documents filed with
the SEC will be available free of charge at the SEC's website, www.sec.gov and
our shareholders will also be able to obtain copies of the proxy statement and
other relevant documents free of charge by directing their requests to Biophan
Technologies, Inc., 150 Lucius Gordon Drive, Suite 215, West Henrietta, New York
14586, Attention: Investor Relations.
The Purchase Agreement is filed herewith as Exhibit 4.1; the form of the Notes
is filed herewith as Exhibit 4.2; the form of the Five-Year Warrants is filed
herewith as Exhibit 4.3; the form of the One-Year Warrants is filed herewith as
Exhibit 4.4; the Security Agreement is filed herewith as Exhibit 10.1; the
amendment to the Biomed Line of Credit Agreement is filed herewith as Exhibit
10.2; the a Biomed $5,000,000 Note is filed herewith as Exhibit 10.3; and the
Subordination Agreement is filed herewith as Exhibit 10.4. The foregoing
descriptions of the those agreements are qualified in their entirety by
reference to such Exhibits.
Cautionary Note Regarding Forward Looking Statements
Statements made in this Current Report on Form 8-K, as well as statements made
by us in periodic filings with governmental entities, press releases and other
public communications, that reflect management's current assumptions and
estimates of future performance may contain forward-looking statements to future
events or future financial performance that involves risks and uncertainties.
These statements are made pursuant to the safe harbor provisions of Section 21E
of the Securities Exchange Act of 1934. These statements are only predictions
and actual results could differ materially from those anticipated in these
statements based upon a number of factors including those uncertainties and risk
factors detailed from time to time in reports filed by us with the Securities
and Exchange Commission, including our most recent reports on Forms 10-K and
10-Q.
Item 3.02. Unregistered Sales of Equity Securities
On October 12, 2006, pursuant to the Purchase Agreement described in Item 1.01
above, we issued to ten qualified institutional buyers (as such term is defined
in Rule 144A under the Securities Act) and/or accredited investors (as
such term is defined in Rule 501(a) under the Securities Act) the
following securities (the "Securities"):
a) an aggregate of $7,250,000 principal amount of our Senior Secured
Convertible Notes due October 11, 2009 (the "Notes");
b) five-year warrants for the purchase of an aggregate of 5,410,498
shares of our common stock at an exercise price of $0.81 per share;
c) five-year warrants for the purchase of an aggregate of 5,410,498
shares of our common stock at an exercise price of $0.89 per share;
and
d) one-year warrants for the purchase of an aggregate of 10,820,896
shares of our common stock at an exercise price of $0.67 per share.
The Notes are convertible, at any time at the election of the holders, into
shares of our common stock at a conversion price of $0.67 per share. If the
entire principal amount of the Notes were converted, we would issue to the
holders an aggregate of 10,820,896 shares of our common stock.
The Securities were issued to the following investors:
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INVESTORS OFFERING PRICE
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Truk Opportunity Fund, LLC $500,000
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Crescent International Ltd. $500,000
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Harborview Master Fund LP $500,000
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CAMOFI Master LDC $1,000,000
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Cranshire Capital, L.P. $750,000
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Castlerigg Master Investments LTD $1,000,000
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BridgePointe Master Fund Ltd $750,000
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Rockmore Investment Master Fund Ltd. $500,000
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Highbridge International LLC $500,000
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Iroquois Master Fund, Ltd $1,250,000
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The Securities were issued in a private placement not involving any public
offering and exempt from registration under the Securities Act pursuant to the
exemptions provided by Section 4(2) of such Act and by Regulation D and
Regulation S promulgated under such Act. The Securities were sold for cash at an
aggregate offering price of $7,250,000. C.E. Unterberg, Towbin acted as the
exclusive placement agent in the offering. We paid the placement agent a cash
fee of $580,000 and issued to it a five-year warrant to purchase an aggregate of
865,672 shares of our common stock at a price of $0.67 per share.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
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Exhibit Number Description of Exhibit
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4.1 Securities Purchase Agreement, dated October 11, 2006, by and among Biophan Technologies,
Inc. and those Purchasers named therein
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4.2 Form of Senior Secured Convertible Notes due October 11, 2009 to be issued pursuant to the
Securities Purchase Agreement, dated October 11, 2006, by and among Biophan Technologies,
Inc. and those Purchasers named therein
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4.3 Form of Five-Year Warrants to be issued pursuant to the Securities Purchase Agreement, dated
October 12, 2006, by and among Biophan Technologies, Inc. and those Purchasers named therein
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4.4 Form of One-Year Warrants to be issued pursuant to the Securities Purchase Agreement, dated
October 12, 2006, by and among Biophan Technologies, Inc. and those Purchasers named therein
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10.1 Security Agreement, dated as of October 11, 2006, by and among Biophan Technologies,
Inc., the Purchasers named therein and Iroquois Master Fund Ltd., as agent for the
Purchasers
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10.2 Amendment No. 1, dated October 11, 2006, to Line of Credit Agreement by and between
Biophan Technologies, Inc. and Biomed Solutions, LLC
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10.3 Amended and Restated Convertible Promissory Note of Biophan Technologies, Inc., in the
principal amount of $5,000,000, dated October 11, 2006, payable to the order of Biomed
Solutions, LLC
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10.4 Subordination and Standstill Agreement dated October 11, 2006, by and among Biophan
Technologies, Inc., Biomed Solutions, LLC, and those Purchasers named therein
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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.
BIOPHAN TECHNOLOGIES, INC.
/s/ Michael L. Weiner
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Date: October 13, 2006 Michael L. Weiner
President and CEO