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 (Date of earliest event reported): March 14, 2008
VioQuest
Pharmaceuticals, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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000-16686
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58-1486040
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(State
or other jurisdiction of
incorporation)
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(Commission
File Number)
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(IRS
Employer Identification
No.)
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180
Mt. Airy Road, Suite 102
Basking
Ridge, NJ 07920
(Address
of principal executive offices)
(908)
766-4400
(Registrant's
telephone number, including area code)
N/A
(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:
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
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Item
1.01
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Entry
into a Material Definitive
Agreement.
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On
March
14, 2008, VioQuest Pharmaceuticals, Inc. (the “Company”) entered into separate
subscription agreements (the “Subscription Agreement”) with several purchasers
(the “Purchasers”) pursuant to which the Company issued and sold to the
Purchasers an aggregate of 765 shares (the “Series A Shares”) of the Company’s
newly-designated Series A Convertible Preferred Stock (the “Series A Stock”) at
a price of $1,000 per share, resulting in gross proceeds to the Company of
$765,000 before deducting commissions and other expenses. In addition to
the
Series A Shares, the Company also issued to the Purchasers five-year warrants
to
purchase an aggregate of 3,825,000 shares of the Company’s common stock at an
exercise price of $0.13 per share (the “Warrants”).
The
Subscription Agreements provide that the Company will file within 45 days
of the
final closing of the offering of the Series A Shares, a registration statement
under the Securities Act covering the resale of the shares of common stock
issuable upon conversion of the Series A Shares and exercise of the Warrants.
The Company further agreed to cause such registration statement to be declared
effective by the Commission within 120 days following the final closing.
In the
event the Company fails to meet such 30-day or 120-day deadlines, it is required
to pay to each investor a cash penalty of 1% of the amount of such investor’s
investment for each monthly period (or portion thereof) in which the Company
is
not in compliance with its registration obligations, but, notwithstanding
anything to the contrary in the Subscription Agreements, in no event shall
the
amount of compensatory payments payable by the Company exceed 10% of the
amount
of such investor’s investment.
In
addition, as a condition to the consummation of the transactions contemplated
by
the Subscription Agreements, on March 14, 2008, the Company and the holders
of a
majority of the outstanding principal indebtedness under the Company’s series of
senior convertible promissory notes issued in June and July 2007 (the “2007
Notes”) entered into a first amendment to the 2007 Notes. Pursuant to this
amendment, upon the initial closing of the transactions contemplated by the
Subscription Agreements, the principal and accrued interest under the 2007
Notes
automatically converted into an aggregate of approximately 3,910 shares of
the
Company’s Series B Convertible Preferred Stock (the “Series B Stock”).
One
of
the Purchasers of Series A Shares and Warrants was Capretti Grandi, LLC,
which
purchased 500 Series A Shares and received Warrants to purchase 2,500,000
shares
of common stock. Dr. Lindsay A. Rosenwald, a significant stockholder of the
Company, is the member manager of Capretti Grandi, LLC.
The
Company’s press release issued March 20, 2008 announcing the sale of the Series
A Shares and Warrants is attached to this report as Exhibit 99.1 and
incorporated by reference herein. The disclosures under Item 3.02 of this
report
are incorporated by reference.
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Item
3.02
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Unregistered
Sales of Equity Securities.
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The
disclosures under Item 1.01 of this report are incorporated by reference.
The
Series A Shares and Warrants were sold to 5 investors, each of which the
Company
reasonably believes is an “accredited investor,” as defined under Rule 501(a) of
the Securities Act of 1933, and no means of general solicitation or advertising
was used in connection with the offering. Accordingly, the Company relied
on the
exemptions from the registration requirements of the Securities Act provided
by
Section 4(2) and Rule 506.
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Item
5.03
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Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal
Year
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In
order
to facilitate the closing of the transactions contemplated by the Subscription
Agreements described under Item 1.01 above, the Company approved and adopted
a
Certificate of Designation of the Series A Stock and Series B Stock (the
“Certificate of Designation”), which became effective upon filing with the
Secretary of State of Delaware on March 14, 2008. The following description
of
the Series A Stock and the Series B Stock is only a summary and is qualified
in
its entirety by the complete description of the terms set forth in the
Certificate of Designation filed with this report as Exhibit 3.1 and
incorporated herein by reference.
Series
A Convertible Preferred Stock
Liquidation
Preference. In
the
event of a liquidation, bankruptcy, dissolution or similar proceeding, the
holders of the Series A Stock shall rank pari
passu
with the
Series B Stock and shall receive an amount equal to 100% of the original
offering price plus any accrued but unpaid dividends (the “Series A Liquidation
Preference”). In the event that the Company is unable to lawfully pay the Series
A Liquidation Preference and Series B Liquidation Preference (as defined
below),
the Series A Stock shall receive a pro rata share of the assets with the
Series
B Stock. After payment of the Series A Liquidation Preference and Series
B
Liquidation Preference, the Series A Stock shall then be entitled to receive
their pro rata share of the remaining assets available for distribution to
stockholders on an “as if” converted basis, together with the holders of the
Common Stock and any other junior stock.
Voluntary
Conversion.
Each
share of Series A Stock may be converted, at any time at the option of the
holder, into common stock at conversion rate (the “Series A Conversion Rate”)
equal to the quotient obtained by dividing (i) $1,000 by an amount equal to
the “Discounted Closing Price.” The term “Discounted Closing Price” is defined
as an amount equal to the lesser of (i) 80% of the average closing sale price
of
the common stock for the 20 trading days immediately preceding the applicable
date such shares of Series A Stock were sold, or (ii) $0.25, in either case
subject to certain adjustments for stock splits and similar events and as
otherwise described below.
Automatic
Conversion.
In the
event the closing price of the Company’s common stock is at least $0.38 (subject
to adjustment) for a period of 20 consecutive trading days, the outstanding
shares of Series A Stock shall automatically convert into shares of common stock
at the Series A Conversion Rate.
Anti-Dilution
Adjustments. The
Conversion Rate
is
subject to standard adjustments for adjusted In addition to adjustments for
stock dividends, splits, combinations and similar recapitalization events.
In
addition, subject to certain exceptions as described in the Certificate of
Designation, if the Company makes issues shares of common stock, or securities
convertible into common stock, at a per share price less than the Discounted
Conversion Price, the Discounted Conversion Price will be automatically reduced
to such lesser price.
Voting.
The
holders of Series A Stock are entitled to vote together with all other holders
of the Company’s voting stock on all matters submitted to a vote of holders
generally, with the holder of each share of Series A Stock being entitled
to one
vote for each share of common stock into which such shares of Series A Stock
could then be converted (regardless of the number of shares of common stock
then
authorized to be issued). In addition, holders of a majority of the outstanding
shares of Series A Stock is required to approve the following
actions:
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The
amendment, alteration or repeal of a provision of the Company’s
certificate of incorporation or bylaws so as to adversely affect
the
relative rights of the Series A Stock;
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The
declaration or payment of dividends or distributions on any securities
of
the Company, other than the Series A Stock and the Series B Stock,
or the
repurchase of any securities of the
Company;
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The
authorization, issuance or increase of any security ranking prior
to or on
parity with the Series A Stock (A) upon a liquidation event (as defined
in
the Certificate of Designation) or (B) with respect to the payment
of any
dividends or distributions;
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The
approval of any liquidation, dissolution or sale of substantially
all of
the assets; and
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Effecting
any amendment of the Company’s certificate of incorporation or bylaws that
would materially adversely affect the rights of the Series A
Stock.
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Dividends.
The
shares of Series A Stock shall be entitled to an annual dividend equal to
6% of
the applicable issuance price per annum, payable semi-annually in cash or
shares
of Common Stock, at the option of the Company; provided,
that
the dividend shall only be payable in shares if such shares are registered
for
resale on an effective registration statement on the date of payment. If
the
Company chooses to pay any dividend in shares of Common Stock, the price
per
share for purposes of calculating the number of shares of Common Stock to
be
issued shall be equal to 90% of the average closing price of the Common Stock
for the 20 trading days prior to the date that such dividend payment becomes
payable.
Redemption.
In the
event that there has not been a voluntary conversion or mandatory conversion
of
the Series A Stock by July 3, 2009 (the
“Redemption Date”),
the
holders of Series A Stock shall have a right to require the Company to
repurchase their Series A Stock out of funds lawfully available (the
“Series A Redemption Right”). The Series A Redemption Right shall rank
pari
passu
with the
Series B Redemption Right, as described below. The redemption price (the
“Series A Redemption Amount” and, together with the Series B Redemption Amount,
the “Aggregate Redemption Amount”)
shall be
equal to $1,000, plus any declared and unpaid dividends. The Series A
Redemption Right shall terminate upon the closing of a Series B Qualified
Financing (as defined below). To
the
extent the Company has insufficient funds as of the date of redemption to
pay
the Aggregate Redemption Amount in full, the Company shall redeem the Series
A
Stock and the Series B Stock on a pro rata basis.
Series
B Convertible Preferred Stock
Liquidation
Preference. In
the
event of a liquidation, bankruptcy, dissolution or similar proceeding, the
holders of the Series A Stock shall rank pari
passu
with the
Series B Stock and shall receive an amount equal to 100% of the original
purchase price of the Series A Shares plus any accrued but unpaid dividends
(the
“Series A Liquidation Preference”). In the event that the Company is unable to
lawfully pay the Series A Liquidation Preference and Series B Liquidation
Preference (defined below), the Series A Stock shall receive a pro rata share
of
the assets with the Series B Stock. After payment of the Series A Liquidation
Preference and Series B Liquidation Preference, the Series A Stock shall
then be
entitled to receive their pro rata share of the remaining assets available
for
distribution to stockholders on an “as if” converted basis, together with the
holders of the Common Stock and any other junior stock.
Voluntary
Conversion. Each
share of Series B Stock shall be convertible, at the option of the holder
thereof, at any time and from time to time at $0.38 per share of Common Stock
(as adjusted for stock splits, combinations and similar events).
Automatic
Conversion. The
Series B Stock shall convert into Common Stock automatically: (i) in the
event
that the closing sale price of the Common Stock is equal to at least $0.38
per
share (as adjusted for stock splits, combinations and similar events) for
20
consecutive trading days and shall convert at such price; (ii) upon the final
closing of a financing in which the Company receives aggregate gross proceeds
of
at least $7 million (“Series B Qualified Financing”), or (iii) upon the Sale of
the Company that does not occur in connection with such a financing.
Anti-dilution
Adjustments. The
Series B Stock will be protected against dilution if the Company effects
a
subdivision or combination of its outstanding Common Stock or in the event
of a
reclassification, stock dividend, or other distribution payable in securities
of
the Company.
Voting
Rights. The
Series B Stock holders will only have those voting rights as provided by
Delaware General Corporation Law.
Redemption.
In the
event that there has not been a voluntary conversion or mandatory conversion
of
the Series B Stock by July 3, 2009 (the “Redemption Date”), the holders of
Series B Stock shall have a right to require the Company to repurchase their
Series B Stock out of funds lawfully available (the “Series B Redemption
Right”). The Series B Redemption Right shall rank pari
passu
with the
Series A Redemption Right. The redemption price (the “Series B Redemption
Amount”) shall equal the Series B Price (subject to appropriate adjustment in
the event of any stock dividends, stock splits, or other similar event),
plus
any declared and unpaid dividends. To
the
extent the Company has insufficient funds as of Redemption Date to pay the
Aggregate Redemption Amount in full, the Company shall redeem the Series
A Stock
and the Series B Stock on a pro rata basis.
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Item
9.01
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Financial
Statements and Exhibits.
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(d) Exhibits
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3.1
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Certificate
of Designation of Series A Convertible Preferred Stock and Series
B
Convertible Preferred Stock filed with the Delaware Secretary of
State on
March 14, 2008.
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99.1
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Press
release dated March 20, 2008.
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SIGNATURE
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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VioQuest
Pharmaceuticals, Inc. |
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| Date:
March 20, 2008 |
By: |
/s/ Brian
Lenz |
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Brian
Lenz |
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Chief
Financial Officer |
EXHIBIT
INDEX
| 3.1 |
Certificate
of Designation of Series A Convertible Preferred Stock and Series
B
Convertible Preferred Stock filed with the Delaware Secretary of
State on
March 14, 2008.
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99.1
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Press
release dated March 20, 2008.
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