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): July 14, 2005
XsunX,
Inc.
(Exact
name of registrant as specified in its charter)
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Colorado
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000-29621
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84-1384159
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(State
or other jurisdiction
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(Commission
File Number)
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(IRS
Employer
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of
incorporation)
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Identification
No.)
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165
Enterprise, Aliso Viejo, California 92656
(Address
of principal executive offices and Zip Code)
Registrant's
telephone number, including area code (949) 330-8060
Copies
to:
Greg
Sichenzia, Esq.
Sichenzia
Ross Friedman Ference LLP
1065
Avenue of the Americas
New
York,
New York 10018
Phone:
(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):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting
material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o 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.
Standby
Equity Distribution Agreement
On
July
14, 2005, XsunX, Inc. (the “Company”) entered into a Standby Equity Distribution
Agreement (the “Distribution Agreement”) with Cornell Capital Partners LP
(“Cornell”) providing for the sale and issuance to Cornell of up to $10,000,000
of Common Stock over a period of up to 24 months after the signing of the
Distribution Agreement. Under the Distribution Agreement, the Company may
sell
to Cornell up to $250,000 in shares of its common stock (the “Common Stock”)
once every five trading days at a price of 96% of the lowest closing bid
price
(as reported by Bloomberg L.P.), of the Common Stock on the principal market
where the Common Stock is traded for the five consecutive trading days following
a notice by the Company to Cornell of its intention to sell shares. The Company
will also pay a 5% commitment fee upon each sale of shares under the
Distribution Agreement. Cornell has agreed not to short any of the shares
of
Common Stock
The
Company has agreed to file a registration statement registering the Common
Stock
issuable upon sales under the Distribution Agreement and no sale will be
made to
Cornell unless and until such registration statement has been declared
effective.
In
connection with the Distribution Agreement, the Company has issued to Cornell
2,544,031 shares of Common Stock as a commitment fee. It also issued to
Newbridge Securities Corporation, a registered broker dealer, 65,232 shares
of
Common Stock as compensation for its services as the exclusive placement
agent
for the sale of the Common Stock under the Distribution Agreement.
12%
Secured Convertible Debentures
Also
on
July 14, 2005, the Company consummated a Securities Purchase Agreement (the
“Purchase Agreement”) dated July 14, 2005 with Cornell providing for the sale by
the Company to Cornell of its 12% secured convertible debentures in the
aggregate principal amount of $850,000 (the “Debentures”) of which $400,000 was
advanced immediately. The balance of $450,000 will be advanced two business
days
prior to the filing by the Company with the Securities and Exchange Commission
of the Registration Statement (as defined below).
The
Debentures mature on the first anniversary of the date of issuance and bear
interest at the annual rate of 12% in cash. The Company is required to make
monthly principal and interest commencing on the first day of the month
following the declaration of effectiveness of the Registration Statement
or 120
days from the date of issuance of the Debentures, whichever occurs first.
Holders
may convert, at any time, the principal amount outstanding under the Debentures
into shares of Common Stock, at a conversion price per share equal to $0.10,
subject to adjustment. Upon three-business day advance written notice, the
Company may redeem the Debentures, in whole or part. In the event that the
closing bid price of the Common Stock on the date that the Company provides
advance written notice of redemption or on the date redemption is made exceeds
the conversion price then in effect, the redemption will be calculated at
120%
of the Debentures face value.
Under
the
Purchase Agreement, the Company also issued to Cornell five-year warrants
to
purchase 4,250,000 and 2,125,000 shares of Common Stock at $0.15 and $0.20,
respectively (collectively, the “Warrants”).
In
connection with the Purchase Agreement, the Company also entered into a
registration rights agreement (the “Registration Rights Agreement”) 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 Debentures and exercise of the Warrants. The Company
is
obligated to use its best efforts to cause the Registration Statement to
be
declared effective no later than November 28, 2005 and to insure that the
registration statement remains in effect until all of the shares of common
stock
issuable upon conversion of the Debentures and exercise of the Warrants have
been sold. In the event of a default of its obligations under the Registration
Rights Agreement, including its agreement to file the Registration Statement
with the Securities and Exchange Commission no later than August 29, 2005,
or if
the Registration Statement is not declared effective by November 28, 2005,
it is
required pay to Cornell, as liquidated damages, for each month that the
registration statement has not been filed or declared effective, as the case
may
be, either a cash amount or shares of our common stock equal to 2% of the
liquidated value of the Debentures.
The
Company’s obligations under the Purchase Agreement are secured by substantially
all of the Company’s assets. As further security for its obligations thereunder,
the Company has deposited into escrow 26,798,418 shares of Common Stock.
In
addition, Tom Djokovich, the Company’s Chief Executive Officer, has granted a
security interest in 925,000 shares of Common Stock that he owns.
See
Item
1.01 for a description of a secured loan obligation by the Company.
Item
3.02 Unregistered Sales of Equity Securities.
See
Item
1.01 above for a description of the transactions pursuant to which the Company
issued Common Stock, Debentures and Warrants. All
securities were issued pursuant to Rule 506 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"), and/or Section 4(2) of
the
Act.
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(a) |
Financial
statements of business acquired.
Not
applicable.
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(b) |
Pro
forma financial information.
Not
applicable.
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Exhibit
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Number
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Description
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4.1
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Convertible
Debenture dated July 14, 2005
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4.2
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Form
of Warrant
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10.1
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Securities
Purchase Agreement dated July 14, 2005 between the Company and
Cornell
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10.2
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Standby
Equity Distribution Agreement dated July 14, 2005 between the Company
and
Cornell
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10.3
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Investor
Registration Rights Agreement dated July 14, 2005
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10.4
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Registration
Rights Agreement dated July 14, 2005
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10.5
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Pledge
and Escrow Agreement dated July 14, 2005 by and among the Company,
Cornell
and David Gonzalez as escrow agent
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10.6
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Security
Agreement dated July 14, 2005 by and between the Company and
Cornell.
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99.1
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Press
Release
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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.
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XsunX,
Inc. |
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By: |
/s/ Tom
Djokovich |
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Chief
Executive Officer |
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Date:
July 15, 2005