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Subsequent Events
6 Months Ended
Jun. 30, 2014
Subsequent Events [Abstract]  
Subsequent Events

13. SUBSEQUENT EVENTS

On August 6, 2014, the Company and Askion GmbH entered into an “Amended and Restated Askion Production Agreement.” This agreement is a mutual settlement and release agreement of two prior unfulfilled purchase orders. The settlement amount of $1,141,644 will be used for future inventory purchases and will be paid to Askion in 9 installments.

On July 21, 2014, the Company entered into a definitive Securities Purchase Agreement (the “Purchase Agreement”) with entities affiliated with institutional investors providing for the issuance of (i) 12,300 shares of Series B convertible preferred stock (the “Preferred Stock”) at a price of $1,000 per share, (ii) Senior Secured Convertible Debentures in the aggregate principal amount of $15,000,000, due, subject to the terms therein, in July 2019 (the “Debentures”), and (iii) warrants (the “Warrants”) to purchase up to an aggregate of approximately 11.0 million shares of common stock, $0.001 par value per share (the “Common Stock”), at an exercise price of $2.45 per share (the “Offering”). The Offering closed on July 24, 2014.

The proceeds of the Offering will be used to redeem all of the Company’s outstanding shares of Series A convertible preferred stock and for general working capital purposes.

The Preferred Stock is convertible into an aggregate of approximately 4.8 million shares of Common Stock and the Debentures are convertible into an aggregate of approximately 5.8 million shares of Common Stock. The Debentures and the shares of Preferred Stock and Warrants described above have not been registered under the Securities Act of 1933, as amended (the “Securities Act”).

 

Subject to certain ownership limitations, the Preferred Stock and Debentures are convertible at any time into shares of Common Stock at an initial conversion price of $2.565 per share (which represents a price above the closing bid price of the Common Stock on July 18, 2014, the trading day immediately prior to the entry into the Purchase Agreement). The Preferred Stock is only entitled to dividends in the event that dividends are paid on the Common Stock, and the Preferred Stock will not have any preferences over the Common Stock, including liquidation rights. The Warrants are also subject to certain ownership limitations and are immediately exercisable. 4.8 million of the Warrants will expire eighteen months from the date of issuance, and 6.2 million of the Warrants will expire five years from the date of issuance.

The Company has also entered into a Registration Rights Agreement with the investors pursuant to which the Company is obligated to file a registration statement within 30 days to register for resale the shares of Common Stock issuable upon conversion of the Preferred Stock and Debentures and upon exercise of the Warrants. If the Company is unable to meet certain filing and effectiveness requirements it could be required to pay up to a maximum penalty of $3.3 million plus interest in liquidating damages.

The Debentures will bear interest at an annual rate of 4%, payable quarterly or upon conversion into shares of Common Stock registered under the Securities Act. The Company’s obligations under the Debentures are secured by a first priority lien on all of the Company’s intellectual property pursuant to the terms of a security agreement (“Security Agreement”) dated July 21, 2014 among the Company and the investors.

Pursuant to the Purchase Agreement, until eighteen months following the effective date of the registration statement covering the resale of the shares underlying the Preferred Stock, Debentures and Warrants, or the date on which such shares may be resold pursuant to Rule 144 under the Securities Act, the investors have the right, but not the obligation, to participate in any financing that the Company undertakes, up to 50% of the aggregate amount of securities being offered.