Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On July 8, 2014, AnythingIT, Inc. entered into a Securities Purchase Agreement
(the "LG Agreement") with LG Capital Funding, LLC ("LG") under which we agreed
to issue two 8% convertible redeemable notes in the principal amount of $105,000
each for an aggregate principal amount of $210,000 (each a "LG Note") in
exchange for (i) $105,000 in cash for the first LG Note; and (ii) for the second
LG Note, a $105,000 promissory note issued by LG to us (the "LG Payment Note")
due May 8, 2015 (contingent on our continuing to meet current information
requirements of Rule 144 under the Securities Act), bearing interest at the rate
of 8% per annum and secured by a pledge of the first LG Note; provided, however,
that LG may substitute other collateral with equivalent appraised value upon
three days prior written notice if we do not object. The transaction closed on
July 11, 2014. We paid legal fees of $5,000 on the first LG Note and are using
the net proceeds for working capital.
The LG Notes are due and payable on July 8, 2015, with interest payable in
shares of common stock. At the option of the holder, the LG Notes are
convertible into shares of our common stock at a conversion price equal to 40%
of the lowest closing bid price of our common stock for the 15 prior trading
days, subject to reduction to 30% if there is "DTC chill" placed on our shares
of common stock. The second LG Note may not be converted until the LG Payment
Note is fully paid.
If we fail to repay the LG Notes when due, or if other events of default
thereunder apply, a default interest rate of 16% per annum will apply. In
addition, if we fail to issue unrestricted stock to LG within three business
days of receipt of a notice of conversion, we must pay LG a $250 per day penalty
that increases to $500 per day beginning on the 10 day; provided, however, that
once each LG Note is cash funded, the penalty will be an increase in the
principal due under the note by 20%. If the notes are not paid at maturity, the
outstanding principal due under the note increases by 10%. In certain instances
we may redeem the first LG Note at 150% of the principal amount of the note plus
any accrued interest. We may not prepay the second LG Note unless the first LG
Note has been redeemed.
All amounts due under the first LG note become immediately due and payable by us
upon the occurrence of an event of default, which includes (i) our failure to
pay the amounts due at maturity, (ii) our failure to deliver shares of our
common stock upon any conversion of the note, (iii) a breach of the covenants,
representations or warranties under the LG Notes or the LG Agreement, (iv) the
appointment of a trustee, a judgment against us in excess of $50,000 (subject to
a cure period), a liquidation of our company or the filing of a bankruptcy
petition, (v) a material breach or default under any other note we have issued,
(vi) a change in the majority of the members of our Board of Directors, (vii)
failure to remain current in our reporting obligations under the Securities
Exchange Act of 1934 or if we should lose the "bid" price of our common stock in
the over the counter market, or (vii) if we should fail to replenish the reserve
of shares we have made with our transfer agent related to the shares issuable
upon conversion of the LG Notes, as well as certain other provisions as set
forth in the note. The events of default under the second LG Note are
substantially similar, but also include (i) if our common stock has a closing
bid price of less than $0.01 for at least five consecutive trading days, and
(ii) if the aggregate dollar trading volume of our common stock is less than
$50,000 in any five consecutive trading days.
As a result of the terms of the LG Agreement, the second LG Note and the LG
Payment Note, there are no assurances we will receive the additional $105,000
proceeds from the second LG Note. At the time the LG Payment Note is paid,
however, we will pay LG's counsel an additional $5,000 in legal fees.
The descriptions of the LG Agreement, the first LG Note, the second LG Note, and
the LG Payment Note are qualified in their entirety by reference to the full
text of the documents, copies of which are filed as Exhibits 4.13, 4.14, 4.15
and 10.27 hereto.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. Description
4.13 8% convertible redeemable promissory note to LG Capital Funding, LLC in
the principal amount of $105,000 due July 8, 2015 (the first LG Note).
4.14 8% convertible redeemable promissory note to LG Capital Funding, LLC in
the principal amount of $105,000 due July 8, 2015 (the second LG Note).
4.15 Collateralized secured promissory note from LG Capital Funding, LLC to
AnythingIT, Inc. in the principal amount of $105,000 due March 8, 2015
10.27 Securities Purchase Agreement dated July 8, 2014 by and between
AnythingIT, Inc. and LG Capital Funding, LLC