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QUANTUMSPHERE, INC. FILES (8-K) Disclosing Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant, Amendments to Articles of Inc. or Bylaws; Change in Fiscal Year

June 23, 2014



Item 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION

Overview Description of the Agreement



On June 19, 2014, QuantumSphere, Inc., a Nevada corporation (the "Registrant"), entered into a Loan and Security Agreement (the "Agreement") with Novus Capital Group, LLC, a Delaware limited liability company (the "Lender"), secured by all of the Registrant's business assets ("Collateral"). Subject to the terms and conditions of the Agreement, the Lender has agreed to make up to two loans (referred to as the "Tranche 1 Loan" and the "Tranche 2 Loan", respectively), from time to time commencing June 19, 2014 and concluding on January 15, 2015 to the Registrant in an aggregate principal amount not to exceed One Million Dollars ($1,000,000). Each Loan shall be in the original principal amount of Five Hundred Thousand Dollars ($500,000) at a fixed interest rate of 15.50% per annum.

The Registrant anticipates using the proceeds of each Loan for working capital.



Description of Tranche 1 Loan

Under the Tranche 1 Loan, the Registrant promises to repay the Lender the principal sum of Five Hundred Thousand Dollars ($500,000) together with interest, calculated at 15.50% per annum, in thirty-six (36) consecutive monthly installments (principal and interest) of not less than Seventeen Thousand Four Hundred Fifty-Five and 34/100 Dollars ($17,455.34), beginning on August 10, 2014, and continuing on the same day of each month thereafter through and including July 10, 2017. If a payment is more than ten (10) days late, the Registrant will be assessed a late fee and charged five percent (5%) of such payment.

Upon the occurrence and continuation of any one or more of the Events of Default specified in the Agreement, the amounts then remaining unpaid on the Tranche 1 Loan, together with any interest accrued, may be declared to immediately due and payable in the sum of all existing delinquent and accrued interest, late fees and charges plus the remaining unpaid principal due under the Tranche 1 Loan. Interest shall accrue on the accelerated balance at the lesser of eighteen percent (18%) per annum or the highest rate allowed under applicable law.

Description of Tranche 2 Loan

As a condition precedent to the Registrant's ability to borrow under the Tranche 2 Loan, the Registrant must secure an additional Three Million Dollars ($3,000,000) of equity financing on or before December 31, 2014. However, in the event the Registrant secures a minimum of Two Million Five Hundred Thousand Dollars ($2,500,000) of equity financing, but less than Three Million Dollars ($3,000,000), the Lender will review the circumstances of the additional equity round and Registrant's financial condition at the time of the additional equity round and use its best efforts to amend the $3,000,000 equity financing requirement.

Under the Tranche 2 Loan, if made, the Registrant promises to repay the Lender the principal sum of Five Hundred Thousand Dollars ($500,000), together with interest, calculated at 15.50% per annum, in thirty-six (36) consecutive monthly installments (principal and interest) of not less than Seventeen Thousand Four Hundred Fifty-Five and 34/100 Dollars ($17,455.34), beginning on March 10, 2015, and continuing on the same day of each month thereafter through and including February 10, 2018. If a payment is more than ten (10) days late, Registrant will be assessed a late fee and charged five percent (5%) of such payment.

2



Upon the occurrence and continuation of any one or more of the Events of Default specified in the Agreement, the amounts then remaining unpaid on the Tranche 2 Loan, together with any interest accrued, may be declared to immediately due and payable in the sum of all existing delinquent and accrued interest, late fees and charges plus the remaining unpaid principal due under the Tranche 2 Loan. Interest shall accrue on the accelerated balance at the lesser of eighteen percent (18%) per annum or the highest rate allowed under applicable law.

Security Interest; Insurance

To ensure the Lender's loans against loss, the Registrant has granted the Lender a senior security interest in all of the Registrant's Collateral and obtained One Million Dollars ($1,000,000) in insurance liability coverage in relation to the Collateral.

ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR END

On June 18, 2014, by unanimous written consent, the Board of Directors of the Registrant, pursuant to the authority granted to it in Section 8.01 of the Registrant's Amended and Restated Bylaws, approved a change to the Registrant's fiscal year end from December 31 to June 30. The change in the Registrant's fiscal year end will become effective for the Registrant's 2015 fiscal year, which will begin July 1, 2014 and end June 30, 2015. The Registrant intends to file a transition report on Form 10-KT for the transition period ended June 30, 2014 in September 2014.


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Source: Edgar Glimpses


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