Item 1.01
Entry into Material Definitive Agreement.
Private Placement Transaction
On July 31,
2017, the Company entered into a Common Stock and Warrant Purchase Agreement, a form of which is attached hereto as
Exhibit
10.1
(the “
Purchase Agreement
”), with certain accredited investors named therein (collectively, the “
Purchasers
”).
Under the terms of the Purchase Agreement, the Company agreed to sell, and the Purchasers agreed to purchase from the Company,
an aggregate of up to 1,750,000 shares (the “
Shares
”) of the Company’s common stock, par value $0.00001
per share (the “
Common Stock
”) and an aggregate of up to 1,750,000 warrants to purchase one share of common
stock (the “
Warrants
” and together with the Shares, the “
Securities
”)(the “
Offering
”).
The exercise price of the Warrants is
$2.10 per share, subject to adjustment as provided therein, and the Warrants will be exercisable beginning on July 31, 2017 through
July 30, 2022. The exercise price and number of shares of Common Stock issuable upon the exercise of the Warrants will be subject
to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar
transaction, and will also be subject to weighted average anti-dilution adjustments in the event the Company issues or is deemed
to have issued any securities below the then exercise price of the Warrants, subject to certain exceptions, during the 12 months
following the closing date, each as described in greater detail in the Warrants. After the six month anniversary of the closing,
if a registration statement covering the issuance or resale of the shares of Common Stock issuable upon exercise of the Warrants
(the “
Warrant Shares
”) is not available for the issuance or resale, as applicable, the Purchasers may exercise
the Warrants by means of a “
cashless exercise.
”
A condition to the Offering was
that officers and directors of the Company and their affiliates had to have invested at least an aggregate of $500,000 into
the Company on the same terms as the Purchasers. In connection therewith, William Kerby, the Chief Executive Officer and
Chairman of the Company agreed to purchase $50,000 of the Securities (25,000 Shares and Warrants); Simon Orange, a member of
the Board of Directors of the Company agreed to purchase $175,000 of the Securities (87,500 Shares and Warrants); Donald
Monaco, a member of the Board of Directors of the Company agreed to purchase $175,000 of the Securities (87,500 Shares and
Warrants); Pat LaVecchia, a member of the Board of Directors of the Company agreed to purchase $10,000 of the Securities
(5,000 Shares and Warrants); and Robert J. Post, a member of the Board of Directors of the Company agreed to purchase $25,000
of the Securities (12,500 Shares and Warrants). Additionally, Stephen Romsdahl, a greater than 5% shareholder of the Company
agreed to purchase $50,000 of the Securities (25,000 Shares and Warrants) and another non-related party, who is a key
distributor of the Company, agreed to purchase $100,000 of the Securities (50,000 Shares and Warrants).
Pursuant to
the terms of the Purchase Agreement, the Company agreed to use commercially reasonable efforts to file a registration statement
on Form S-1 (or Form S-3, if available) with the Securities and Exchange Commission (the “
Registration Statement
”)
within 45 days following the closing of the Offering to register the resale by the Purchasers of the Shares and Warrant Shares
and to cause the Registration Statement to become effective within 120 days following the closing of the Offering, subject to penalties
as described in the Purchase Agreement. The Purchase Agreement also requires the Company to apply for listing of its Common Stock
on the NASDAQ Capital Market (“
NASDAQ
”) within 60 days following the closing of the Offering and to cause the
Shares to be listed on the NASDAQ no later than 120 days following closing of the Offering.
The combined purchase price for
one Share and one Warrant to purchase one share of Common Stock in the Offering is $2.00. The Company expects the aggregate
net proceeds from the Offering, after deducting the placement agents’ fees payable in cash (described below) and other
estimated offering expenses, to be approximately $2.7 million. The Company intends to use the aggregate net proceeds to expand its
technology division, increase its alternative lodging rental count, and general corporate purposes.
The Purchase Agreement contains customary
representations, warranties and agreements by the Company and customary conditions to closing. The Company anticipates closing
the Offering on or before Thursday, August 3, 2017.
Under the Purchase Agreement, the Company
has agreed, subject to certain exceptions, not to enter into any agreement to issue or announce the issuance or proposed issuance
of any Common Stock or Common Stock equivalents for a period of 90 days following the effective date of the Registration Statement.
The foregoing summaries of the Securities
Purchase Agreement and the Warrants do not purport to be complete and are qualified in their entirety by reference to the full
texts of the form of the form of Warrant, and Purchase Agreement that are filed herewith as
Exhibits 4.1 and 10.1
, respectively.
The representations, warranties and covenants
contained in Purchase Agreement and the Warrants were made only for purposes of such agreements and as of specific dates, were
solely for the benefit of the parties to the Purchase Agreement and the Warrants, respectively, and may be subject to limitations
agreed upon by the contracting parties. Accordingly, the Purchase Agreement and the Warrants are incorporated herein by reference
only to provide investors with information regarding the terms of the Purchase Agreement and the Warrants, and not to provide investors
with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures
in the Company’s periodic reports and other filings with the Commission.
This report does not constitute an offer
to sell, or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in
which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of
any such state or jurisdiction.
Placement Agency Agreement
In connection with the Offering and on
July 31, 2017, the Company entered into a Placement Agency Agreement (the “
Placement Agreement
”) with Northland
Securities, Inc. (the “
Agent
”). Pursuant to the Placement Agreement, the Agent agreed to serve as our exclusive
placement agent in connection with the Offering on a “
reasonable efforts
” basis. In consideration for the services
provided by the Agent, the Company agreed to pay the Agent, 8% of the gross proceeds from the sale of the Shares and Warrants in
the Offering and, for the consideration of $50, to sell to the Agent, a warrant to purchase shares of Common Stock equal to 5%
of the Shares sold in the Offering (the “
Agent Warrants
”). The Company also agreed to reimburse up to $150,000
of the expenses of the Agent in connection with the Offering. The Placement Agreement includes customary representations and warranties
and includes indemnification rights of the Agent. The Agent is also entitled to the registration rights and liquidated damages
associated therewith which the Purchasers have pursuant to the Purchase Agreement.
The foregoing summaries of the Placement
Agreement and the Agent Warrants do not purport to be complete and are qualified in their entirety by reference to the full texts
of the form of Agent Warrants, and Placement Agreement that are filed herewith as
Exhibits 4.2 and 1.1
, respectively.
Conversion of Series A Preferred Stock
A condition to the closing of the Offering
is that William Kerby, our Chief Executive Officer and Chairman and Donald P. Monaco, our Director, provide the Company conversion
notices, on behalf of themselves and the entities which they control, which are irrevocable prior to the closing of the Offering
(but are revocable in the event the Offering does not close), agreeing to convert the Series A 10% Cumulative Convertible Preferred
Stock (“
Series A Preferred Stock
”) beneficially owned by them into Common Stock of the Company. Currently, Mr.
Kerby and Mr. Monaco hold in aggregate 1,869,611 shares of Series A Preferred Stock, which each have the right to vote 100 voting
shares, for an aggregate of 186,961,100 voting shares, representing approximately 92.5% of out total voting shares on any and all
shareholder matters. The conversion notices, which have been delivered to the Company, provide for the conversion, immediately
following the closing of the Offering, of the Series A Preferred Stock into Common Stock of the Company on a 2-for-1 basis (as
provided by the current terms of the Series A Preferred Stock). As such, immediately following the closing of the Offering, the
Series A Preferred Stock will convert into 3,789,222 shares of Common Stock and Mr. Kerby and Mr. Monaco will no longer have voting
control over the Company.
Board Representation Agreement
As additional consideration for Pacific
Grove Capital LP (“
Pacific Grove
”), agreeing to participate in the Offering as a Purchaser, the Company entered
into a Board Representation Agreement with Pacific Grove. Pursuant to the Board Representation Agreement, Pacific Grove will be
granted the right to designate one person to be nominated for election to the Company’s board of directors so long as (i)
Pacific Grove together with its affiliates beneficially owns at least 4.99% of the Common Stock, or (ii) Pacific Grove together
with its affiliates beneficially owns at least 75% of the Securities purchased in this Offering. The Board Representation Agreement
is effective upon the closing of the Offering.
The foregoing
summary of the Board Representation Agreement does not purport to be complete and is qualified in its entirety by reference to
the full text of the Board Representation Agreement filed herewith as
Exhibit 10.2
.