Page 10 of 14 – SEC Filing
| Item 3. | Source and Amount of Funds or Other Consideration. |
The Issuer previously entered into an agreement with Family Trading pursuant to which Family Trading lent the Issuer up to $15.0 million under an unsecured revolving credit facility (the “Family Trading Credit Facility“) in order to fund the Issuer’s newbuilding program and working capital relating to its operating vessels. The Family Trading Credit Facility was due to be repaid December 31, 2016 but the maturity was extended until February 28, 2017.
On February 21, 2017, the Issuer amended and restated the Family Trading Credit Facility (the “Amended Family Trading Credit Facility“) in order to, among other things, remove any limitation in the use of funds drawn down under the facility, reduce the mandatory cash payment due under the facility when the Issuer raises capital through the issuance of certain securities, remove the revolving feature of the facility, and extend the facility for up to three years. Further, under the terms of the Amended Family Trading Credit Facility, if the Issuer raises capital via the issuance of warrants, debt or equity, it is obliged to repay any amounts due under the Amended Family Trading Credit Facility and any accrued interest and fees up to the time of the issuance in cash or in Common Shares at Family Trading’s option. Family Trading retains the right to delay this mandatory repayment at its absolute discretion. For the first six months after the execution of the facility, no more than $3.5 million can be mandatorily prepaid in cash. Subject to certain adjustments pursuant to the terms of the Amended Family Trading Credit Facility, the number of common shares to be issued as repayment of the amounts outstanding under the facility will be calculated by dividing the amount redeemed by 80% of the lowest daily volume weighted average price (“VWAP“) of the common shares on the Nasdaq Capital Market during the twenty consecutive trading days ending on the trading day prior to the payment date (the “Applicable Price“), provided, however, that at no time shall the Applicable Price be lower than $0.60 per common share (the “Floor Price“).
Further, in the case where the Issuer raises capital (whether publicly or privately) and the Applicable Price is higher than the lowest of (henceforth the “Issuance Price“):
| a. | the price per share issued upon an equity offering of the Issuer; |
| b. | the exercise price of warrants or options for Common Shares; |
| c. | the conversion price of any convertible security into Common Shares; or |
| d. | the implied exchange price of the Common Shares pursuant to an asset to equity or liability to equity swap, |
then the Applicable Price will be reduced to the Issuance Price. Finally, in case the Applicable Price is higher than the exercise price of the Issuer’s outstanding warrants (the “Warrants“), the Applicable Price will be reduced to the exercise price of such outstanding Warrants.
On February 21, 2017, the Issuer issued to Family Trading an aggregate 627,000 Common Shares in connection with the partial repayment of $0.9 million of accrued interest and fees outstanding under the Amended Family Trading Credit Facility.
On February 22, 2017, the Issuer issued to Family Trading an aggregate 150,000 Common Shares in connection with the partial repayment of $0.2 million of accrued interest and fees outstanding under the Amended Family Trading Credit Facility.
This Amendment No. 19 is being filed to reflect an increase in the number of Common Shares issuable upon conversion of $0.05 million currently outstanding under the Amended Family Trading Credit Facility due to a decrease in the Applicable Price to $0.76. As of March 27, 2017, there is currently $0.05 million outstanding under the Amended Family Trading Credit Facility, which is convertible into 71,053 Common Shares.
This Amendment No. 19 is also being filed to reflect an increase in the number of Common Shares issuable to Race Navigation in connection with adjustments to the exercise price of the Warrants. Each Warrant currently has an exercise price of $0.76 and entitling its holder to purchase 3.28 Common Shares, as may be further adjusted. Pursuant to the terms of the Warrants, holders also have the right, but not the obligation, to, in any exercise of each Warrant, to designate the variable price being offered by the Issuer pursuant to a different security. The Issuer currently has outstanding Series C Convertible Preferred Stock that are convertible at the lower of (i) $3.75 or (ii) 75% of the lowest daily VWAP of the Common Shares for any trading day during the twenty-one (21) consecutive trading day period ending on, and including, the trading day immediately prior to the date of delivery of an exercise notice (but in no event can this variable exercise price be less than $0.25) (the “Conversion Ratio“) and buy a proportionate number of Common Shares based on the variable price in effect on the date of exercise. The Conversion Ratio is subject to certain adjustments in accordance with the terms of the Statement of Designations, Preferences and Rights of the Series C Convertible Preferred Stock of the Issuer.
Further, this Amendment No. 19 is being filed to reflect an increase in the number of outstanding Common Shares of the Issuer following the issuance of an additional 5,168,627 Common Shares from March 17, 2017 through March 27, 2017 as a result of (i) exercises of the Warrants; (ii) fixed request notices submitted in connection with the common stock purchase agreement dated February 2, 2017, as amended (the “Equity Line“) between the Issuer and Kalani Investments Limited; and (iii) the issuance of commitment shares to Kalani Investments Limited pursuant to a second amendment of the Equity Line.
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