On November 8, 2013, IV and the issuer settled $686,962 in accounts payable of the issuer, in exchange for shares of common stock of the issuer following a Section 3(a)(10) fairness hearing. The payables were owned by IV, which previously agreed to purchase them from vendors of the issuer in exchange for cash payment of the full amount owed.
Pursuant to an order approving stipulation for settlement of claims between IV and the issuer, IV is entitled to receive that number of shares with an aggregate value equal to the claim amount plus third party agent and reasonable attorney fees, divided by 80% of the following: the closing price of the issuer’s common stock on the date prior to entry of the order, not to exceed the arithmetic average of the volume weighted average prices of any five trading days during a period equal to that number of consecutive trading days following the date of initial receipt of shares required for the aggregate trading volume to exceed $7 million, less $0.01 per share, as reported by the Bloomberg Professional service of Bloomberg LP.
IV is prohibited from receiving any shares of common stock that would cause it to be deemed to beneficially own more than 9.99% of the issuer’s total outstanding shares at any one time. IV received an initial issuance of 8,690,000 common shares, and may be required to return or be entitled to receive shares, based on the calculation summarized in the prior paragraph. Based on the $0.1820 per share closing price on November 7, 2013, IV would be entitled to 5,650,000 shares. For purposes of calculating the percent of class, the reporting persons have assumed that there were 78,238,653 shares of common stock outstanding immediately prior to the issuance of shares to IV, such that 5,650,000 shares issued to IV would represent approximately 6.8% of the outstanding common stock after such issuance.
In connection with the transaction, IV agreed not to hold any short position in the issuer’s common stock, and not to engage in or effect, directly or indirectly, any short sale until at least 180 days after the end of the calculation period.
IV is not a registered broker-dealer or an affiliate of a registered broker-dealer. Voting and dispositive power with respect to shares of common stock owned by IV is exercised by David Sims, Director. However, for so long as IV holds any shares, it is prohibited from, among other actions: (1) voting any shares of issuer common stock owned or controlled by them, exercising any dissenter’s rights, executing or soliciting any proxies or seeking to advise or influence any person with respect to any voting securities of the issuer; (2) engaging or participating in any actions or plans that relate to or would result in, among other things, (a) acquiring additional securities of the issuer, alone or together with any other person, which would result in them collectively beneficially owning or controlling, or being deemed to beneficially own or control, more than 9.99% of the total outstanding common stock or other voting securities of the issuer, (b) an extraordinary corporate transaction such as a merger, reorganization or liquidation, (c) a sale or transfer of a material amount of assets, (d) changes in the present board of directors or management of the issuer, (e) material changes in the capitalization or dividend policy of the issuer, (f) any other material change in the issuer’s business or corporate structure, (g) actions which may impede the acquisition of control of the issuer by any person or entity, (h) causing a class of securities of the issuer to be delisted, (i) causing a class of equity securities of the issuer to become eligible for termination of registration; or (3) any actions similar to the foregoing.
Each of IGP and Messrs. Kirkland, O’Neil, Kreger and Coulston disclaims beneficial ownership or control of any of the securities covered by this statement. IGP and Messrs. Kirkland, O’Neil, Kreger and Coulston directly own no shares of the issuer. However, by reason of the provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, IGP or Messrs. Kirkland, O’Neil, Kreger and Coulston may be deemed to beneficially own or control the shares owned by IV. Messrs. Kirkland, O’Neil and Kreger are each managing directors, members and 30% beneficial owners of IGP. Mr. Coulston is a director, member and 10% beneficial owner of IGP. IGP is a stockholder and beneficial owner of IV.
