SUBSEQUENT EVENTS |
12 Months Ended | |||
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Sep. 30, 2015 | ||||
| Subsequent Events [Abstract] | ||||
| Subsequent Events [Text Block] |
Common Stock Transactions On October 29, 2015, the Company issued 539,925 shares of its common stock as settlement of a vendor note payable of $130,970 and accounts payable of $85,000. On December 31, 2015, the Company issued 512,820 shares of its common stock as part of the legal settlement of Michael Martin and Paris Arey vs. Beacon Enterprise Solutions Group, Inc. and MDT Labor, LLC, et al (See Note 9 – Commitments and Contingencies). Lease Agreements On October 13, 2015, the Company entered into an agreement to lease 5,377 square feet of office space in Naples, Florida. The lease commenced on November 1, 2015 and expires on November 30, 2022. The annual base rent under the lease is $131,736 for the first lease year, and is subject to annual increases of between 3.4% and 4.1%. The Company provided a security deposit of $19,716, pursuant to the terms of the lease. On November 1, 2015 the Company entered into an agreement to lease warehouse space in Marysville, Washington. The lease has a term of 12 months an annual base rent of $36,000 and a security deposit of $3,000. On December 15, 2015 the Company entered into an agreement to lease office and warehouse space in Indianapolis, Indiana. The lease commences on January 1, 2016, and expires on January 1, 2019. Annual base rent under the lease is $32,400 and a security deposit of $2,500 was paid upon the execution of the lease. Authorization of Series F Preferred Stock The Board of Directors of the Company authorized the designation of a new series of preferred stock, the Series F Stock, out of its available “blank check preferred stock” and authorized the issuance of up to 1,980,000 shares of the Series F Stock. The Company filed a Certificate of Designation with the Secretary of State of the State of Nevada on November 2, 2015. The Series F Stock has various rights, privileges and preferences, including: (i) a stated value of $4.00 per share; (ii) conversion into 20 shares of Common Stock (subject to adjustments) upon the filing of an amendment to the Company’s Articles of Incorporation incorporating a reverse stock split; and (iii) a liquidation preference in the amount of the stated value. Employment Agreements On October 26, 2015, the Company entered into a three year employment agreement with Carlie Ancor, pursuant to which Mr. Ancor agreed to continue to serve as the Company’s Chief Marketing Officer. The agreement was amended on January 1, 2016 such that Mr. Ancor’s title was changed to Chief Technology Officer. The agreement, as amended, is subject to automatic one-year extensions, unless either party provides ninety (90) days notice of its intention not to renew the agreement. The agreement provides for an annual base salary of $200,000, as well as performance bonuses based upon the achievement of certain milestones. In connection with the employment agreement, Mr. Ancor is entitled to receive the greater of (a) 25,000 share equivalents; or (b) shares equivalent to 1% of the Company’s fully diluted equity, to be granted, at the earliest to occur of (a) 24 months from the date of execution of the employment agreement; or (b) thirty (30) days prior to any significant conversion event; or (c) upon Mr. Ancor’s demand. The Company may not terminate Mr. Ancor without cause and if Mr. Ancor terminates for any reason other than voluntarily or for cause, he’s entitled to receive his salary and benefits for the remainder of his contractual term in the form of a lump sum cash payment sixty (60) days after his termination date. Entry into a Credit Facility and Repayment of Senior Secured Notes On November 3, 2015, the Company entered into a credit agreement, dated October 28, 2015 (the “Agreement”), pursuant to which the Company entered into $8 million in term loans from Lateral Investment Management (“Lateral”). Proceeds of $1.8 million were used to extinguish an aggregate principal amount of approximately $3.5 million of Senior Secured Promissory Notes, pursuant to a tender offer. The noteholders who tendered their notes received the tender offer consideration of $0.50 per $1 principal amount of the Notes from the proceeds from the term loan, and all interest payable on the notes was forgiven. The Company expects to recognize approximately a $3.5 million gain related to the extinguishment of the Senior Secured Promissory Notes. Proceeds of $3.0 million were deposited into a restricted Company bank account which requires Lateral’s approval to utilize.
In connection with the agreement, the Company issued 555,344 shares of Series F preferred stock to Lateral. The Company and Lateral also entered into a Registration Rights agreement in connection with the issuance of these shares, pursuant to which the Company must file a registration statement with the SEC, with respect to the shares. Lateral may request redemption of some or all of its Series F preferred stock any time after October 28, 2017, subject to the Company (a) meeting certain minimum capitalization and EBITDA requirements; and (b) being able to continue as a going concern on a post-redemption basis. The redemption price per share is variable and equals 10 (ten) times the last twelve months EBITDA, multiplied by the Lateral fully-diluted ownership percentage and then divided by the Lateral Series F preferred stock shares outstanding. In addition, Lateral was granted anti-dilution rights which permit it to receive additional equity securities to maintain its fully-diluted ownership interest to the extent that the Company issues equity securities to third parties, up to a maximum of $5,000,000. Furthermore, so long as Lateral maintains a fully-diluted ownership interest of 10% or more, the Company may not without Lateral’s consent (a) enter into new indebtedness exceeding $400,000; (b) undertake a Major Transaction Event (as defined); or (c) terminate or replace its Chief Executive Officer.
Related Party Advances
Subsequent to September 30, 2015, the CEO provided additional short-term cash advances aggregating to approximately $90,000 (bringing the outstanding balance to approximately $273,000) to the Company in order to meet short-term liquidity needs. The aggregate obligation is now evidenced by a Promissory Note dated December 30, 2015, whereby the stated interest rate is 3% per month (retroactive to the initial May 1, 2015 cash advance) and the stated maturity date for the full principal amount and all accrued interest is January 31, 2016. If the Company fails to repay the note, certain late charges and default interest rates apply.
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