On December 23, 2014, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain investors (the “Purchasers”) for an aggregate of $6,000,000 (the “Aggregate Subscription Amount”). Pursuant to the Securities Purchase Agreement, the Company issued the following to the Purchasers: (i) 60,000 shares of Series C Preferred Stock convertible into 8,571,429 shares of the Company’s common stock, par value $0.001, (the “Common Stock”); and (ii) warrants (the “Warrants”) to purchase an aggregate of 8,571,429 shares of Common Stock (the “Warrant Shares”) for an exercise price of $1.00 per share and discussed further in Note1-ORGANIZATION-LIQUIDITY.

 

As of June 16, 2015, the Company received the initial $2,000,000 and the investors have released an additional $3,000,000 in consideration of the formation of an Operations and Finance Committee (“OPFIN Committee”) to provide the Company with financial and operational direction, management and oversight with respect to the Company’s operating plan and fiscal year 2015 revised budget and to oversee progress. The Committee is comprised of Messrs. Farkas and Shapiro, current members of the Company’s Board of Directors, an outside financial consultant, a representative of the Purchasers and Mr. Ira Feintuch, the Company’s newly appointed Chief Operating Officer. The OPFIN Committee has formed an Executive Committee consisting of Mr. Farkas, the outside financial consultant and Mr. Feintuch to carry out the day to day financial and operational management of the Company.

 

In connection with the sale of the Securities Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company agreed to register all of the shares of Common Stock underlying the Series C Preferred Stock and Warrant Shares (the “Registrable Securities”) on a Form S-1 registration statement (the “Registration Statement”) to be filed with the Securities and Exchange Commission and to use best efforts to cause the Registration Statement to be declared effective under the Securities Act within 180 days following the Closing Date (or, in the event of a “full review” by the SEC, within 210 calendar days following the Closing Date) (the “Effectiveness Deadline”). If the Company does not meet the Effectiveness Deadline, the Company will have to pay the Purchaser a penalty equal to 1% of the Aggregate Subscription Amount with a maximum of 10% of the Aggregate Subscription Amount and pay interest at the rate of 18% per annum. The Company may choose to pay all liquidated damages in Preferred Shares at 125% of the liquidated damages amount.

 

On December 23, 2014, in connection with the closing and as a condition to the closing of the Securities Purchase Agreement, the Company entered into an amended and restated employment agreement with its Chief Executive Officer, Michael Farkas. The amendment provides that Mr. Farkas shall have a salary of Forty Thousand Dollars ($40,000) per month. However, for such time as any of the Aggregate Subscription Amount is still held in escrow, Mr. Farkas shall receive Twenty Thousand Dollars ($20,000) in cash and the remaining amount of his compensation: (i) shall be deferred; and (ii) must be determined by the compensation committee of the Company’s Board of Directors to be fair and equitable. Additionally, beginning on the date that the Aggregate Subscription Amount is released from escrow and continuing for so long as the Series C Preferred Stock remains issued and outstanding, Mr. Farkas’ salary shall only be paid in cash if doing so would not put the Company in a negative operating cash flow position.

 

 

During the period of October 6, 2014 through December 1, 2014, the Company issued four notes to the Company’s CEO totaling $135,000, due on the six month anniversary date of the respective note with interest at 8% per annum. As of June 11, 2015, the Company had repaid $35,300, inclusive of interest.

 

During the period of October 1, 2014 through June 12, 2015, the Company issued warrants to purchase 293,863 shares of the Company’s common stock to the former members of Beam at exercise prices ranging from $0.33 to$1.05 per share inclusive of warrants payable to purchase 31,000 shares of the Company’s common stock as of September 30, 2014 as described in Note 11-Warrant Payable.

 

During the period of October 16, 2014 through June 12, 2015 the Company issued 23,810 fully vested shares of common stock under its 2014 Omnibus Incentive Plan at to two principals of a consulting firm to provide strategic financial services.

 

During the period of October 1, 2014 through June 1, 2015, the Company issued 150,034 fully vested common shares of the Company’s common stock at the closing market price on the date of the respective meeting and options to purchase 90,000 shares of the Company’s common stock at exercise prices ranging from $0.33 to $0.53 per share to members of the Board of Directors for attendance of Board meetings held during this time.

 

During the period of March 23, 2015 through June 11, 2015, the Company issued a member of the Board of Directors, as a participant of and attendance of meetings it newly formed OPFIN Committee an option to purchase 30,000 shares of the Company’s common stock at prices ranging from $0.34 - $0.38 per share. The options vest in two years and expire five years from date of issuance.

 

On November 13, 2014, the Company issued a $200,000 note to an investor which is convertible into 400,000 shares of the Company’s common stock at $0.50 per share and 400,000 warrants at an exercise price of $1.05 per common share. The note was due on January 14, 2015 with interest at 12% per annum. Through June 12, 2015, the Company has repaid $109,008, inclusive of accrued interest. On February 20, 2015, the Company renegotiated the terms of the remaining unpaid $100,000 balance such that the due date extended to March 31, 2015. The investor received a five year warrant, which vests immediately, to purchase an additional 400,000 shares of the Company’s common stock at $1.00 per share. On May 1, 2015, the Company renegotiated the terms of the unpaid balance with the investor such that the unpaid balance accrued interest at the rate of 2% per month as of April 1, 2015 and the balance was due as of June 1, 2015. In consideration thereof, the Company, on April 1, 2015 issued the investor an a warrant to purchase an additional 50,000 common shares at $1.00 which expires on April 1, 2020. Additionally, the Company extended the expiration dates of warrants issued in October 2012 to purchase 150,000 shares of the Company’s common stock to the investor and its affiliates from October 2015 to October 2017. The $100,000 balance and accrued interest thereon remains unpaid as of June 16, 2015.

 

On December 15, 2014, the Company issued a note to a company for which the Company’s CEO is the majority shareholder and an officer of the company, in the amount of $65,000, due on the six month anniversary date of the note with interest at 8% per annum. The Note was paid in full with accrued interest thereon of $202 on December 29, 2014.

 

On December 28, 2014, the Company issued, to the Company’s CEO, a warrant to purchase 5,000 shares of the Company’s common stock at $0.40 per share. The warrants vest immediately and expire two years from date of issuance. The warrant was issued as a replacement of a warrant which had expired in accordance with the CEO’s employment contract.

 

On February 3, 2015, the Company issued 50,000 fully vested shares of the Company’s common stock to a consultant to advise the Company about corporate governance matters.

 

On February 25, 2015, the Company entered into an agreement with the investors of the October 11, 2013 financing whereby the investors were issued warrants to purchase 3,336,734 shares of the Company’s common stock at $0.70 per share which vest immediately, expire in five years from date of issuance and contain anti-dilution provisions as defined. These additional warrants represent the additional warrants the investors would have received as a result of the December 23, 2014 financing had they not surrendered their anti-dilution protection during the quarter ended June 30, 2014. In conjunction therewith, the October 2013 investors surrendered 2,102,142 previously issued warrants as consideration for removal of derivative liability attributes from warrants issued in conjunction with the Company’s October 2013 financing. Additionally, the exercise price of all 19,761,714 warrants issued to the October 2013 and December 2013 investors was reduced to $0.70 per common share and contain anti-dilution protection, as defined.

 

On April 10, 2015 the Company issued 51,586 fully vested common shares to its Chief Financial Officer as compensation for the period of November 2014 through April 2015.

 

On April 17, 2015, the Company issued 432,892 fully vested shares of its common stock to a consulting firm for services rendered by a financial consultant for the period of December 2014 through March 2015.

 

 

On December 31, 2014, the United States Bankruptcy Court, District Arizona (“Bankruptcy Court”) issued a Confirmation Order Pursuant to Bankruptcy Rule 9024 in the Bankruptcy case, in regards to: Electric Transportation Engineering Corporation (Case No. 13-626), confirming a Plan of Reorganization of Electric Transport Engineering Corporation, whereby the Official Committee of Unsecured Creditors of the estate (“Creditors”) would own 50% of the Reorganized Electric Transport Engineering Corporation (“Reorganized ETEC”) in consideration, as amended, of foregoing the amounts formerly owed by the estate and the Company would own the remaining 50% of the Reorganized ETEC in consideration of an amended payment of $375,000 in cash and a subsequent $825,000 cash payment to the Creditors secured by 8,250 shares of Series B Convertible Preferred Stock. The Company’s amended cash payment consisted of reimbursement of $281,000 of Creditors’ professional fees, and the foregoing of the $94,000 in receivables owed the Company and included in accounts receivable on the Company’s condensed consolidated balance sheet on September 30, 2014.

 

 

On March 24, 2015, the Company entered into an employment agreement with Mr. Ira Feintuch to serve as the Company’s Chief Operating Officer for an initial three year term renewable annually unless written notice is provided 60 day prior to the renewal term. In consideration thereof, Mr. Feintuch is to receive an annual salary of $250,000 and shall participate in all benefit programs of the Company. In addition, Mr. Feintuch will receive 1,000,000 Series A Convertible Preferred shares, 1,500 Series C Convertible Preferred shares and 1,500,000 shares of common stock. These stock awards are payable 50% upon the signing of the employment agreement and 50% upon the one year anniversary of the employment agreement.

 

As part of the litigation settlement, on April 24, 2015, with two former members of Beam were issued an aggregate of 100,000 fully vested shares of the Company’s common stock valued at $0.35 per share.

 

On May 21, 2015, the Company offered the remaining seven former Beam members shares of the Company’s common shares in consideration of surrendering their anti-dilution benefit contained in the original Beam acquisition agreement. As of June 12, 2015, two members had accepted the Company’s offer, however the shares have yet to be issued.