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
September 30, 2004
Date of Report
(Date of earliest event reported)
Commission file number 333-75044
CATALYST LIGHTING GROUP, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 84-1588927
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(State or other jurisdiction of incorporation (I.R.S. employer
or organization) identification number)
7700 Wyatt Drive
Forth Worth, TX 76108
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(Address of principal (Zip Code)
executive offices)
Issuer's telephone number, including area code: (817) 738-8181
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On September 30, 2004, Catalyst Lighting Group, Inc. ("Registrant" or
the "Company") authorized the sale to Laurus Master Fund, Ltd. ("Laurus") of (1)
a Secured Convertible Term Note in the principal amount of two million dollars
($2,000,000), which is convertible into the Registrant's common stock at an
initial fixed conversion price of $2.66 per share (the "Term Note") and (2) a
Secured Revolving Note (the "Revolving Note") and a Secured Convertible Minimum
Borrowing Note (together with the Revolving Note, the "AR Notes") in the
aggregate principal amount of up to three million dollars ($3,000,000), which
are convertible into the Registrant's common stock at an initial fixed
conversion price of $2.66 per share. Laurus also acquired a Common Stock
Purchase Warrant for the purchase of up to 472,000 shares of Common Stock,
exercisable until September 30, 2009 at a price of $3.00 per share (the
"Warrant"). The Term Note and AR Notes (collectively, the "Notes") mature on
September 30, 2007 and are secured by a first priority lien on all collateral of
the Registrant, including inventory, accounts receivable, raw materials and all
of its ownership interests in Whitco Company, LP, its wholly-owned subsidiary.
The Notes accrue interest at a rate per annum equal to the "prime rate"
published in The Wall Street Journal from time to time, plus two percent (2%),
but shall in no event be less than six percent (6%) per annum. The Registrant
also granted registration rights with respect to all shares of Common Stock
underlying the Notes and Warrant. Closing and funding occurred on September 30,
2004.
The $2,000,000 payment for the Term Note was placed into an escrow
account solely controlled by Laurus (the "Escrow Account"). The Company may
request that Laurus release all or any portion of the amounts contained in the
Escrow Account following, or in connection with, the consummation of an
acquisition, joint venture or capital investment (a "Transaction") by the
Company or any of its subsidiaries. Such a release is subject to Laurus'
evaluation of all factors it considers, in its sole discretion, relevant at the
time of such requested release, including its determination of (i) the relative
benefit of such Transaction to the Company and its subsidiaries and (ii) the
overall performance (financial or otherwise) of the Company and its subsidiaries
at such time. Laurus is under no obligation to release any amounts and the
release of such amounts is in Laurus' sole and absolute discretion.
The AR Notes were granted pursuant to an accounts receivable and
inventory financing line, a portion of which was used to pay off the Company's
prior accounts receivable lines with Marquette Commerical Finance, Inc.
("Marquette") and Capital Growth Asset Based Bridge Loan Fund II ("Capital").
Further advances of funds are based on eligible accounts, as determined by
Laurus in its sole discretion.
Copies of the Securities Purchase Agreement, Security Agreement, the
Notes, the Warrant, the Master Security Agreement and Registration Rights
Agreement are filed as exhibits to this report and are incorporated herein by
reference.
ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT
In connection with the transactions with Laurus described above, the
Registrant's existing financing arrangements with Marquette and Capital were
terminated as of September 30, 2004. These were accounts receivable credit lines
similar to that which Laurus now provides. Early termination penalties payable
were $60,000 to Marquette and $10,000 to Capital.
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 2004, Registrant authorized the sale to Laurus of the
Notes in the aggregate principal amount of up to five million dollars, all of
which are convertible into the Registrant's common stock at an initial fixed
conversion price of $2.66 per share. Laurus also acquired the Warrant for the
purchase of up to 472,000 shares of Common Stock, exercisable until September
30, 2009 at a price of $3.00 per share. The Notes have a three year maturity
date and are secured by a first priority lien on all collateral of the
Registrant, including inventory, accounts receivable, raw materials and all of
its ownership interests in Whitco Company, LP, its wholly-owned subsidiary. The
Notes accrue interest at a rate per annum equal to the "prime rate" published in
The Wall Street Journal from time to time, plus two percent (2%), but shall in
no event be less than six percent (6%) per annum. The Registrant also granted
registration rights with respect to all shares of Common Stock underlying the
Notes and Warrant. Closing and funding occurred on September 30, 2004.
The $2,000,000 payment for the Term Note was placed into the Escrow
Account, and the Company may request that Laurus release all or any portion of
the amounts contained in the Escrow Account following, or in connection with,
the consummation of a Transaction by the Company or any of its subsidiaries.
Such a release is subject to Laurus' evaluation of all factors it considers, in
its sole discretion, relevant at the time of such requested release, including
its determination of (i) the relative benefit of such Transaction to the Company
and its subsidiaries and (ii) the overall performance (financial or otherwise)
of the Company and its subsidiaries at such time. Laurus is under no obligation
to release any amounts and the release of such amounts is in Laurus' sole and
absolute discretion.
The AR Notes were granted pursuant to an accounts receivable financing
line, a portion of which was used to pay off the Company's prior accounts
receivable lines with Marquette and Capital. Further advances of funds are based
on eligible accounts, as determined by Laurus in its sole discretion.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT
On September 30, 2004, Registrant authorized the sale to Laurus of the
Notes in the aggregate principal amount of up to five million dollars
($5,000,000), all of which are convertible into the Registrant's common stock at
an initial fixed conversion price of $2.66 per share. Laurus also acquired the
Warrant for the purchase of up to 472,000 shares of Common Stock, exercisable
until September 30, 2009 at a price of $3.00 per share. The Notes are secured by
a first priority lien on all collateral of the Registrant, including inventory,
accounts receivable, raw materials and all of its ownership interests in Whitco
Company, LP, its wholly-owned subsidiary. The Notes accrue interest at a rate
per annum equal to the "prime rate" published in The Wall Street Journal from
time to time, plus two percent (2%), but shall in no event be less than six
percent (6%) per annum. The Registrant also granted registration rights with
respect to all shares of Common Stock underlying the Notes and Warrant. Closing
and funding occurred on September 30, 2004.
The $2,000,000 payment for the Term Note was placed into the Escrow
Account, and the Company may request that Laurus release all or any portion of
the amounts contained in the Escrow Account following, or in connection with,
the consummation of a Transaction by the Company or any of its subsidiaries.
Such a release is subject to Laurus' evaluation of all factors it considers, in
its sole discretion, relevant at the time of such requested release, including
its determination of (i) the relative benefit of such Transaction to the Company
and its subsidiaries and (ii) the overall performance (financial or otherwise)
of the Company and its subsidiaries at such time. Laurus is under no obligation
to release any amounts and the release of such amounts is in Laurus' sole and
absolute discretion.
The AR Notes were granted pursuant to an accounts receivable financing
line, a portion of which was used to pay off the Company's prior accounts
receivable lines with Marquette and Capital. Further advances of funds are based
on eligible accounts, as determined by Laurus in its sole discretion.
Payments under the Term Note begin November 1, 2004 solely with respect
to that amount actually released from the Escrow Account to the Company. To
date, no such funds have been advanced other than fees payable to Laurus in
connection with the transaction. Interest accrues on that portion of funds which
are not advanced to the Company but remain in the Escrow Account and is payable
at the maturity date or upon conversion or redemption of the Term Note.
Payment pursuant to the Notes may be accelerated or increased: (1) in
the event the Company fails to make any payments of principal or interest as and
when due, (2) if there is a material breach of any representations or
warranties, or covenants (after notice and opportunity to cure), contained in
the Notes, the Securities Purchase Agreement, Security Agreement or any
documents related to the transactions contemplated thereby, (3) upon failure to
file a registration statement with respect to all shares of Common Stock
underlying the Notes and Warrant by November 15, 2004, (4) upon failure to have
the Registration Statement declared effective by January 10, 2005, (5) if a stop
trade order or suspension of trading of the Company's common stock has occurred
provided that the Company shall not have been able to cure such trading
suspension within 30 days of the notice thereof or list the Common Stock on
another principal market within 60 days of such notice, (6) upon commencement of
bankruptcy proceedings or appointment of a receiver or trustee and (7) if there
has been a change in control without Laurus' prior written consent. In the event
of such a default, interest on the Notes increases 2% per month, up to a maximum
annual rate of 15%.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
10.1
Securities Purchase Agreement
10.2
Secured Convertible Term Note
10.3
Common Stock Purchase Warrant
10.4
Registration Rights Agreement
105.
Master Security Agreement
10.6
Security Agreement
10.7
Secured Revolving Note
10.8
Secured Convertible Minimum Borrowing Note
SIGNATURES
FORM 8-K
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.
CATALYST LIGHTING GROUP, INC.
/s/ Dennis H. Depenbusch
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Dennis H. Depenbusch
Chairman and CEO
Date: October 4, 2004