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Subsequent Events
6 Months Ended
Jun. 30, 2015
Subsequent Events [Abstract]  
Subsequent Events

NOTE 12—SUBSEQUENT EVENTS

 

Financing

 

On August 13, 2015, the Company executed a Loan and Security Agreement with Leap Tide Capital Partners III, LLC (“Leap Tide”), pursuant to which the Company borrowed, on such date, $2,000 from Leap Tide (the “LT Loan”). Principal and accrued interest shall be due and payable on August 13, 2016, the first anniversary of the date of funding. Interest accrues and is payable quarterly at a rate of 10% per annum. At the closing, $100 of the proceeds were deposited into an escrow account which will be used to fund the payment of interest; the escrow account shall be maintained at not less than $50 until the last three months before maturity.

 

In addition to the interest payable in cash described above, Leap Tide received 850,000 shares of the Company’s common stock (the “Initial Shares”) at the closing and became entitled to vested rights to receive 179,167 additional shares of the Company’s common stock (each vested right to receive one share, a “Vested Share Right”) per month for each full month that the full principal amount of the LT Loan remains outstanding, subject to immediate vesting upon acceleration of the LT Loan for the Company’s failure to timely increase its authorized shares of common stock as described below. The number of Vested Share Rights that accrue in a given month shall be prorated to the extent less than the full principal amount is outstanding and/or for any partial month in which no principal amount is outstanding. Leap Tide is entitled to receive the Company’s common stock underlying its Vested Share Rights after the expiration of the Cash Settlement Period (defined below).

 

The Company may pre-pay all principal and interest accrued on the LT Loan at any time. In addition, the Company may on or prior to 30 days after the maturity or earlier acceleration or repayment of the LT Loan (such 30-day period being referred to herein as the “Cash Settlement Period”) repurchase any or all Initial Shares and settle any or all Vested Share Rights accrued under the LT Loan for cash in lieu of stock. The cash repurchase/settlement price shall be an amount equal to $0.30 for each Initial Share so repurchased and each Vested Share Right so settled. The Company’s right to repurchase Initial Shares and settle Vested Share Rights for cash in lieu of stock shall be subject to Lender’s right to put the same to the Company at a higher price as described below.

 

The Company does not have sufficient authorized common stock to cover the full amount of Vested Share Rights that will accrue through maturity of the LT Loan. Failure by the Company to effectuate a charter amendment to authorize sufficient additional common stock by March 31, 2016 shall be deemed an event of default, triggering Leap Tide’s right to accelerate the LT Loan and entitling Leap Tide to put to the Company, at a price equal to $0.40 per Initial Share and Vested Share Right, any Initial Shares and any Vested Share Rights.

 

Subject to customary permitted liens, the LT Loan is secured by a first priority lien on the assets of the Company, except that the lien on the Company’s shares of DSIT is pari passu with a preexisting lien held by DSIT to secure its loans to the Company in the principal amount of up to $5,000. DSIT and Leap Tide have entered into an intercreditor and collateral agency agreement reflecting the pari passu nature of their respective liens. Each of the Company’s domestic subsidiaries (GridSense, OMX Holdings, Inc. and OmniMetrix) have guaranteed the repayment of the LT Loan, and GridSense and OmniMetrix have pledged their respective IP as security.

 

Certain members of the management of the Company's DSIT Solutions subsidiary (including its CEO and its CFO--who also serves as CFO of the Company) have invested in Leap Tide (which is a special entity formed to make the loan) on the same terms as the other investors in Leap Tide. None of these persons has any role in the management of Leap Tide. 

 

GridSense Loan

 

Under the latest amendment to the Loan Agreement (Note 4), the Company was required to make a $250 payment to the Restricted Account by July 31, 2015. The Bank agreed to delay this required payment until the Company completed its recent financing (see above). Following the completion of the financing, the Company paid $480 to the Bank and applied the $500 in current restricted deposits (see Note 10) to the outstanding debt to the Bank in full satisfaction of amounts due under the Loan Agreement.