Note 13 - Subsequent Events |
9 Months Ended |
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Feb. 29, 2016 | |
| Subsequent Events [Abstract] | |
| Subsequent Events [Text Block] |
Note 13 – Subsequent Events
On March 18, 2016, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to purchase an aggregate of up to $500,000 in subscription amount corresponding to an aggregate of up to $555,555 in 10% Original Issue Discount Convertible Promissory Notes (the “10% Notes”) due, subject to the terms therein, in installments as set forth below. The purchase will occur, at the Company’s option, in up to five tranches, with the first tranche of $200,000 being purchased on March 18, 2016; the second tranche of $50,000 being purchased on the first Friday, which is a trading day after the date (the “Filing Date”) that a registration statement (the “Registration Statement”) registering shares of common stock of the Company issuable upon conversion or repayment of the 10% Notes, is filed with the SEC; the third tranche of $50,000 being purchased on the first Friday, which is a trading day at least three (3) trading days after the Company receives initial comments from the SEC on the Registration Statement, or the date that the Company is notified by the SEC that the Registration Statement will not be reviewed; the fourth tranche of $100,000 being purchased on the first Friday, which is a trading day at least three trading days after of the date that the Registration Statement is declared effective by the SEC (the “SEC Effective Date”); and the fifth Tranche of $100,000 being purchased on the first Friday, which is a trading day after the thirty (30) day anniversary of the SEC Effective Date.
At the earlier of September 18, 2016 or two (2) trading days after the SEC Effective Date, the Company must begin to redeem 1/24th of the face amount of the Notes and any accrued but unpaid interest on a bi-weekly basis. Such amortization payment may be made, at the option of the Company, in cash or, subject to certain conditions, in common stock of the Company pursuant to a conversion rate equal to the lower of (a) $0.80 (the “Fixed Conversion Price”) or (b) 75% of the lowest daily volume weighted average price of the common stock of (the “VWAP”) in the 20 consecutive trading days immediately prior to the applicable conversion date. At any time after the issue date of the Notes, the holder may convert the 10% Notes into shares of common stock of the Company at the holder’s option. The conversion price will be the Fixed Conversion Price. Subject to certain exclusions, if the Company sells or issues its common stock or certain common stock equivalents at an effective price per share that is lower than the Fixed Conversion Price, the conversion price will be reduced to equal to such lower price. On March 18, 2016, the Company issued Old Main a 10% Original Issuance Discount Convertible Promissory Note in the principal amount of $222,222 with the original issue date of March 18, 2016 in exchange for $200,000 pursuant to the Purchase Agreement, representing the first tranche under the Purchase Agreement.
On March 18, 2016, the Company also issued Old Main an 8% Convertible Promissory Note (the “8% Note”) in the principal amount of $200,000 for Old Main’s commitment to enter into an equity line transaction with the Company and prepare all of the related transaction documents. The 8% Note bears interest at the rate of 8% per annum. At the earlier of the six month anniversary of the Closing Date or two (2) trading days after the SEC Effective Date, the Company must begin to redeem 1/6th of the face amount of the 8% Note and any accrued but unpaid interest on a monthly basis. Such amortization payment may be made, at the option of the Company, in cash or, subject to certain conditions, in common stock of the Company pursuant to a conversion rate equal to the lower of (a) $1.07 (the “8% Note Fixed Conversion Price”) or (b) 75% of the lowest VWAP in the twenty (20) consecutive trading days ending on the trading day that is immediately prior to the applicable conversion date. Subject to certain exclusions, if the Company sells or issues its common stock or certain common stock equivalents at an effective price per share that is lower than the 8% Note Fixed Conversion Price, the conversion price will be reduced to equal to such lower price.
In connection with the Purchase Agreement, the Company and Old Main entered into a Registration Rights Agreement dated March 18, 2016 (the “Registration Rights Agreement”), whereby the Company agreed to register the resale of the shares of the Company’s common stock underlying the 10% Notes, among other securities, pursuant to the terms thereof. In the event that the Company fails to meet certain timing requirements set forth in the Registration Rights Agreement, among other penalties, for each month that such delay continues, the outstanding principal amount of the 10% Notes will be increased in an amount equal to the product of 2% multiplied by the aggregate subscription amount paid pursuant to the Purchase Agreement.
As discussed in Note 9, on April 11, 2016, convertible promissory notes in favor of Mr. Koretsky and Mr. Binder were finalized. These notes are unsecured and bear interest at the rate of 6% per annum on interest accrued through February 29, 2016 and 10% per annum thereafter. No payments are required until April 1, 2017, at which time all accrued interest becomes due and payable. Principal will be paid in eight equal quarterly installments, together with accrued interest, beginning on July 1, 2017. At the note holder’s election, at any time prior to payment or prepayment of the loans in full, all principal and accrued interest under the loans may be converted, in whole or in part, into the Company’s securities. Upon such an election, the holder will receive one “Unit” for each $1.07 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $1.07 per share.
We evaluated subsequent events after the balance sheet date through the date the financial statements were issued. We did not identify any additional material events or transactions occurring during this subsequent event reporting period that required further recognition or disclosure in these financial statements.
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