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Subsequent Events
9 Months Ended
Aug. 31, 2015
Subsequent Events [Abstract]  
Subsequent Events

Note 16 - Subsequent Events

 

Amendment to Certificate of Incorporation

 

On September 24, 2015, the Company filed an Amendment to its certificate of incorporation to designate 55,000 shares of preferred stock as Series I Preferred Stock (the “Series I Preferred”). Each share of Series I Preferred has a stated value equal to ten dollars ($10.00) (the "Stated Value"). The relative rights, preferences and limitations of the Series I Preferred Stock shall be as follows:

 

Each share of Series I Preferred Stock shall entitle the holder thereof, on all matters submitted to a vote of the stockholders of the Company, to that number of votes as shall be equal to the aggregate number of shares of Common Stock into which such holder's shares of Series I Preferred Stock are convertible on the record date for the stockholder action without taking into account potential conversions of any other convertible securities issued by the Company.

 

The Company’s Board of Directors shall not declare a dividend payable to holders of any class of stock other than Series I Preferred Stock until the Company shall have declared and paid dividends to the holders of Series I Preferred Stock equal in aggregate to the Stated Value of the outstanding shares of Series I Preferred Stock.

 

Upon the liquidation, dissolution and winding up of the Company, the holders of the Series I Preferred Stock shall be entitled to receive in cash out of the net assets of the Company, whether from capital or from earnings available for distribution to its stockholders, before any amount shall be paid to the holders of common stock or to the holders of any other class or series of equity stock, an amount equal to (a) the Stated Value of the outstanding shares of Series I Preferred Stock on the record date for the distribution less (b) the amount of any dividends previously paid to the holders of the Series I Preferred Stock.

 

The number of shares of Common Stock to which a holder of Series I Preferred Stock shall be entitled upon a conversion shall equal the quotient determined by dividing (x) the Stated Value of the shares of Series I Preferred Stock recited in the conversion notice by (y) the conversion price. The conversion price is one hundred percent (100%) of the average of the five (5) lowest closing bid prices for the Common Stock during the ten (10) consecutive trading days immediately preceding the conversion date or other date of determination, as quoted by Bloomberg, LP

 

The Company shall not effect any conversions of the Series I Preferred Stock and the holder shall not have the right to convert any shares of Series I Preferred Stock to the extent that after giving effect to such conversion, the holder, together with any affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934 and the rules promulgated thereunder) in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion.

 

Amended and Restated Convertible Promissory Note

 

 

So as to cure a default on a note, which had matured on June 26, 2015 and remained unpaid, and was purchased by EXO in April 2015, the Company and EXO agreed to amend the principal balance on the note to reflect the sum of the original principal, the default interest and the default fees owed on the note and to extend the due date. Consequently, the amended and restated note carries a principal balance of $209,847 and matures on March 31, 2016. All other significant terms remain the same, including a conversion feature that allows EXO to convert the debt into shares of Common Stock at a 49% discount to the market price, as defined. The interest rate is 8% per annum.

Amendment to Certificate of Incorporation

 

 

One October 14, 2015, the Company filed an Amendment to its certificate of incorporation to designate 51 shares of preferred stock as Series J Preferred Stock (the “Series J Preferred”). Each share of Series I Preferred has a stated value equal to $0.00001. The relative rights, preferences and limitations of the Series J Preferred Stock shall be as follows:

 

There are no Liquidation Rights associated with the Series J Preferred Stock. No conversion of the Series J Preferred Stock is permitted.

 

All shares of the Series J Preferred Stock shall rank (i) senior to the Company’s common stock, par value $0.00001 per share (“Common Stock”), and any other class or series of capital stock of the Company hereafter created, except as otherwise provided in clauses (ii) and (iii) of this Article V, (ii) pari passu with any class or series of capital stock of the Company hereafter created and specifically ranking, by its terms, on par with the Series J Preferred Stock and (iii) junior to any class or series of capital stock of the Company hereafter created specifically ranking, by its terms, senior to the Series J Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary.

 

Upon the Company’s receipt of notice of a default or an event of default under or pursuant to any document or agreement executed by the Company and TCA Global Credit Master Fund, LP (“TCA”), each one (1) share of the Series J Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding Common Stock and Preferred Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (z) the Numerator. For the avoidance of doubt, if the total issued and outstanding Common Stock eligible to vote at the time of the respective vote is 5,000,000, the voting rights of one share of the Series J Preferred Stock shall be equal to 102,036 (e.g. ((0.019607 x 5,000,000) / 0.49) – (0.019607 x 5,000,000) = 102,036). The issuance of 51 shares of Series J Preferred to TCA gives TCA voting control of the Company if the Company receives a default notice from TCA, under any agreement between the two entities..

 

So long as any shares of Series J Preferred Stock are outstanding, the Company shall not, without first obtaining the unanimous written consent of the holders of Series J Preferred Stock, alter or change the rights, preferences or privileges of the Series J Preferred so as to affect adversely the holders of Series J Preferred Stock.

 

Securities Purchase Agreement

 

On October 14, 2015 the Company closed on a Securities Purchase Agreement (“SPA”) with TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership, as lender (“TCA”).  Pursuant to the SPA, TCA agreed to loan the Company up to a maximum of $5 million for working capital and general operating expenses.  An initial amount of $500,000 was funded by TCA at the closing of the SPA.  Any increase in the amount extended to the Company shall be at the discretion of TCA.


The amounts borrowed pursuant to the Credit Agreement are evidenced by a Senior Secured, Convertible, Redeemable Debenture (the “Debenture”) and the repayment of the Debenture is secured by a first position security interest in substantially all of the Company’s assets in favor of TCA, as evidenced by a security agreement by and between the Company and TCA and a first position security interest in substantially all of the Company’s subsidiaries’ assets in favor of TCA, as evidenced by a security agreement by and among the Company’s subsidiaries and TCA and a pledge agreement for the Company’s ownership of its subsidiaries.  The Debenture is in the original principal amount of $500,000, is due and payable, along with interest thereon, on April 14, 2017, and bears interest at the rate of 18% per annum. Principal payments are due in monthly installments beginning in February 2016.


Upon the occurrence of an event of default, TCA may convert all or any portion of the outstanding principal, accrued and unpaid interest, and any other sums due and payable under the Debenture into shares of the Company’s common stock at a conversion price equal to 85% of the lowest daily volume weighted average price of the Company’s common stock during the five trading days immediately prior to such applicable conversion date, in each case subject to TCA not being able to beneficially own more than 4.99% of the Company’s outstanding common stock upon any conversion.


As further consideration for TCA entering into and structuring the SPA, the Company paid TCA an advisory fee of $175,000 by issuing to TCA 17,500 shares of its Series I convertible preferred stock.  Additionally, the Company issued 51 shares of its Series J preferred stock to TCA, which gives TCA voting control of the Company if the Company is in default of any agreement with TCA.

 

The Company used $70,000 of the proceeds of the TCA funding to make its final payment to Laurus (see Note 9). This payment satisfies all remaining debt payable to Laurus, which amounted to $1,859,582 at August 31, 2015. Consequently, the Company will record a trouble debt restructuring gain of approximately $1,790,000 in the fourth quarter of fiscal 2015.