Subsequent Events | 12 Months Ended |
Aug. 31, 2014 |
Subsequent Events [Abstract] | |
Subsequent Events | Note 20 – Subsequent Events |
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Issuance of Unregistered Shares of Common Stock |
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On September 2, 2014, the Company issued to a certain unaffiliated party a total of 1,650,000 shares of its restricted common stock valued at $0.018 as a direct investment per a Securities Purchase Agreement. |
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On September 15, 2014, pursuant to a warrant right the Company issued to Eric Kotch (the Company’s former CFO), a total of 15,000,000 shares of its restricted common stock valued at $0.05. The warrant was exercisable at the earlier to occur of (i) six months from issuance; or (ii) after any three consecutive days where the weighted average share price exceeded $0.50 and was to expire two years from the date of issuance. |
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On September 15, 2014, the Company issued to current officers of the Company, pursuant to various warrant rights, a total of 20,000,000 shares of its restricted common stock valued at $0.001. The warrants were exercisable at the earlier of six months from issuance or after any three consecutive days where the weighted average share price exceeded $0.50 and were to expire two years from the date of issuance. |
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On September 18, 2014, the Company issued to a certain unaffiliated party a total of 344,500 shares of its restricted common stock valued at $0.001 as a signing bonus on a management consulting agreement. |
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On October 15, 2014, the Company issued to a certain unaffiliated party a total of 267,857 shares of its restricted common stock per terms of the consulting agreement. |
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On October 21, 2014, the Company issued to a certain unaffiliated party a total of 3,571,428 shares of its restricted common stock valued at $0.0084 per share as a direct investment per a Securities Purchase Agreement. |
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On October 21, 2014, the Company issued to a certain unaffiliated party a total of 3,571,428 shares of its restricted common stock valued at $0.0084 per share as a direct investment per a Securities Purchase Agreement. |
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On October 22, 2014, the Company issued to TCA Global Credit Master Fund LP a total of 15,284,916 shares of its restricted common stock valued at $0.0122 as a direct investment per a Securities Purchase Agreement. |
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On October 24, 2014, the Company issued to a certain unaffiliated party a total of 421,407 shares of its restricted common stock valued at $0.0237 per share as a direct investment per a Securities Purchase Agreement. |
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On October 24, 2014, the Company issued to a certain unaffiliated party a total of 421,407 shares of its restricted common stock valued at $0.0237 per share as a direct investment per a Securities Purchase Agreement. |
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On October 24, 2014, the Company issued to a certain unaffiliated party a total of 421,407 shares of its restricted common stock valued at $0.0237 per share as a direct investment per a Securities Purchase Agreement. |
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On October 24, 2014, the Company issued to a certain unaffiliated party a total of 421,407 shares of its restricted common stock valued at $0.0237 per share as a direct investment per a Securities Purchase Agreement. |
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On October 27, 2014, the Company issued a total of 6,287,370 shares of its restricted common stock upon conversion of approximately $50,000 principal and accrued interest held by certain assignees of the Panache debt. |
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On November 11, 2014, the Company issued to current officers of the Company, pursuant to their employment agreements, a total of 10,050,000 shares of its restricted common stock valued at $0.001. |
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On November 15, 2014, the Company issued to a certain unaffiliated party a total of 107,143 shares of its restricted common stock per terms of the consulting agreement. |
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On November 17, 2014, the Company issued a total of 284,900 shares of its common stock upon conversion of $5,000 principal amount of the Company’s debt. |
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On November 21, 2014, the Company issued a total of 601,074 shares of its common stock upon conversion of $10,549 principal and interest of the Company’s debt. |
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On November 21, 2014, the Company issued a total of 2,716,749 shares of its restricted common stock upon conversion of approximately $41,000 principal and accrued interest held by an assignee of the Panache debt. |
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On December 2, 2014, the Company issued to current officers of the Company, pursuant to their employment agreements, a total of 10,050,000 shares of its restricted common stock valued at $0.001. |
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On December 3, 2014, the Company issued to a certain unaffiliated party a total of 250,000 shares of its restricted common stock per terms of a consulting agreement. |
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On December 5, 2014, the Company issued a total of 867,402 shares of its common stock upon conversion of $15,674 principal and interest of the Company’s debt. |
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On December 8, 2014, the Company issued a total of 498,063 shares of its common stock upon conversion of $9,000 principal amount of the Company’s debt. |
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On December 10, 2014, the Company issued a total of 608,744 shares of its common stock upon conversion of $11,000 principal amount of the Company’s debt. |
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Debt Issuances |
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On September 3, 2014, the Company issued an unsecured convertible promissory note to an accredited investor in the principal amount of $100,000. The note bears interest at 12% per annum. The note matures on March 1, 2015. At any time or times from the issuance date of the note and until the maturity dates, the note holder is entitled to convert any portion of the outstanding and unpaid amount into fully paid and non-assessable shares of common stock. The conversion price will be based on a 45% discount to the lowest daily trading prices for the ten previous trading days to the date of conversion. |
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On September 8, 2014, the Company received the second Tranche of funding under the Typenex note in the amount of $63,418 in exchange for a promissory note in the amount of $66,250. See Note 10. |
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On September15, 2014, the Company entered into an agreement with Kevin Mulhearn (see Note 11), under which Mr. Mulhearn agreed to reduce the amount then due under the Mulhearn Consolidated Note to $125,000. |
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On October 20, 2014 (the “TCA Effective Date”), we borrowed an initial $1,900,000.00 from TCA Global Credit Master Fund, LP (“TCA”) and issued a senior secured convertible redeemable debenture to TCA in the original principal amount of $1,900,000.00 (the “TCA Debenture”) pursuant to the terms of a securities purchase agreement we entered into with TCA (the “TCA SPA”). We agreed to borrow up to maximum of $5,000,000.00 in one or more closings in TCA’s sole discretion (each a “Funding”) under the TCA SPA. Our subsidiaries, Office Supply Line, Inc., OSL Diversity Marketplace, Inc., OSL Rewards Corporation, and Go Green Hydroponics Inc. (“GGH”) (collectively the “Subsidiary Guarantors”) signed the TCA SPA as joint and several guarantors. We agreed to issue $223,500.00 worth of our unregistered shares of common stock to TCA upon the TCA Effective Date, in exchange for advisory services previously provided to us, with the price per share valued at the lowest volume weighted average price for our common stock for the 5 business days immediately prior to the TCA Effective Date (the “TCA Initial Shares”). We agreed to issue additional shares of our unregistered common stock to TCA in the event that TCA does not realize $223,500.00 of net proceeds from the sale of the TCA Initial Shares. The amount of additional shares issued would only be the amount required for TCA to meet the $223,500.00 threshold upon their sale. If after twelve months, TCA has not realized net proceeds totaling $223,500.00 from the sale of the TCA Initial Shares, and the additional shares if applicable, then we agreed to redeem TCA’s remaining shares upon written notice for an amount sufficient for TCA to reach the $223,500.00 threshold. Further, we agreed to pay a 2% transaction fee to TCA for each Funding, which will be subtracted from the principal amount of each respective Funding, as well as a one-time due diligence fee of $8,000.00 and legal fees of $15,000.00 to TCA. The TCA SPA also contains additional covenants, representations, conditions precedent, and other provisions that are customary of securities purchase agreements. |
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We used $1,800,000.00 from the issuance of the TCA Debenture to finance our purchase of GGH. The TCA Debenture bears interest at the rate of 11% per annum, has a maturity date of October 20, 2015 (“TCA Maturity Date”), and was funded by TCA in cash on October 20, 2014. We may redeem the TCA Debenture at any time prior to the TCA Maturity Date, by giving written notice to TCA three business days beforehand, and by paying the entire outstanding amount plus related fees on the third business day. We agreed to make monthly payments of principal, interest, and a redemption premium in the amount of $11,400.00, subject to a 5% late charge if we do not pay within the 5 day grace period of each monthly payment. |
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The interest rate under the TCA Debenture will increase to 18% per annum, and TCA may accelerate full repayment of the TCA Debenture upon the occurrence of an event of default. An event of default includes, but is not limited to: (i) our failure to pay any amount due under the TCA Debenture, (ii) an assignment by us for the benefit of our creditors, (iii) any court order appointing a receiver, liquidator, or trustee for us (subject to a 30 day cure period), (iv) any court order adjudicating us insolvent (subject to a 30 day cure period), (v) our filing of a bankruptcy petition, (vi) the filing of a bankruptcy petition against us (subject to a 30 day cure period), (vii) we admit we cannot pay our debts, or (vii) we breach the TCA Debenture or TCA SPA (each a “TCA Event of Default”). |
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The TCA Debenture is convertible by TCA into shares of our common stock at any time while the TCA Debenture is outstanding, if agreed upon by us and TCA, or in TCA’s sole discretion upon a TCA Event of Default. If a TCA Event of Default occurs, TCA may convert the TCA Debenture at the conversion price for each share of 85% multiplied by the lowest volume weighted average price for our common stock during the 5 trading days prior to the relevant notice of conversion (“TCA Conversion Price”). The TCA Conversion Price is subject to adjustment upon certain events, including but not limited to stock splits, dividends, the sale of all or substantially all of our assets, reclassification of our common stock, and our effectuation of a merger or consolidation. TCA does not have the right to convert the TCA Debenture into our common stock if such conversion would result in TCA’s beneficial ownership exceeding 4.99% of our outstanding common stock at that time. During the time that the TCA Debenture is outstanding, we have agreed to reserve the total number of our common stock that would be issuable if the entire TCA Debenture was converted at that time. The TCA Debenture also contains waiver, notice, and assignment provisions that are customary of convertible debentures. |
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The TCA SPA, TCA Debenture, and all future debentures issued pursuant to the TCA SPA are guaranteed by the Subsidiary Guarantors pursuant to separately signed guaranty agreements (the “TCA Guaranty Agreements”). The TCA Guaranty Agreements contain representations, warranties, covenants, and other provisions that are customary of guaranty agreements. The TCA SPA, TCA Debenture, and all future debentures issued pursuant to the TCA SPA are secured by a security interest in all of the Subsidiary Guarantors’ assets, whether now existing or hereafter acquired, pursuant to separately signed security agreements (the “TCA Security Agreements”). The TCA Guaranty Agreements contain representations, warranties, covenants, and other provisions that are customary of security agreements. |
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We, as well as Robert Rothenberg (“Rothenberg”), our Chief Executive Officer, and Eli Feder (“Feder”), our Chief Corporate Development Officer and Director, and Steve Gormley (“Gormley”), our Chief Business Development Officer and Director (collectively, the “Pledging Parties”), have signed pledge agreements (the “TCA Pledge Agreements”), whereby the Pledging Parties pledged to TCA as additional security for the TCA Debenture all of their right, title and interest in, and provided a first priority lien and security interest on (i) all outstanding shares of common stock of the Subsidiary Guarantors owned by us and (ii) a total of 60,000,000 shares of our common stock owned by the Pledging Parties. |
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Acquisition of Go Green Hydroponics Inc. |
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On October 20, 2014 (“GGH Closing Date”), OSL Holdings Inc. (“we,” “us,” “our,” or “Company”) entered into and completed the closing of a stock purchase agreement (the “Malinovitz SPA”) with Jeffrey Malinovitz (“Malinovitz”) and Go Green Hydroponics Inc. (“GGH”), whereby we completed the purchase of 750 shares of GGH’s common stock from Malinovitz, representing 50% of GGH’s outstanding shares, for a total of $900,000.00 (the “Malinovitz Purchase Price”). GGH is a hydroponics, indoor gardening and cultivation supply retail operation, located in Los Angeles, California, specializing in the sale of hydroponic cultivation equipment, mineral nutrient solutions and gardening resources and equipment. |
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The Malinovitz Purchase Price was paid on the GGH Closing Date as follows: (i) $800,000.00 to Malinovitz and (ii) $100,000.00 (the “Malinovitz Holdback Funds”) to Ingber & Associates (the “Escrow Agent”). In the event that GGH’s final net liquid working capital is less than $235,000.00 (the “NLWC Amount”) on the GGH Closing Date, the Malinovitz Purchase Price will be decreased by 50% multiplied by the difference between $235,000.00 and the NLWC Amount on the GGH Closing Date, with the maximum amount of decrease equal to the Malinovitz Holdback Funds. Net liquid working capital means the difference between (x) the GGH’s Liquid Current Assets (defined below), and (y) the DDH’s Immediately Due Current Liabilities (defined hereafter). The phrase, “Liquid Current Assets” means cash and near-cash assets immediately convertible into cash, and the phrase “Immediately Due Current Liabilities” means GGH’s current liabilities that are due and owing on or before October 31, 2014, as well as all credit card charges on all Company credit cards as of the Closing date, whether or not same are reflected upon the balance sheet as of the Closing Date and whether or not same are technically due in accordance with the terms of such credit cards to be paid by GGH on or before October 31, 2014, in each instance as determined in accordance with GAAP. GGH’s accounts receivable are not deemed Liquid Current Assets. |
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The Company’s completion of the acquisition was conditioned upon the sale by Jason Babadjov (“Babadjov”) of his 50% interest in GGH to us. The Malinovitz SPA also contains additional covenants, representations, warranties, conditions precedent, and other provisions that are customary of stock purchase agreements including Malinovitz’ agreement to refrain from competing with GGH for a period of two years after the GGH Closing Date. |
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On October 20, 2014, GGH entered into an employment agreement with Malinovitz as Vice President of Marketing of GGH (the “Malinovitz Employment Agreement”). The Malinovitz Employment Agreement provides for a base salary of $250,000.00 annually. In addition, Malinovitz is entitled to participate in GGH’s profit sharing program, including profit allocation for 2014 provided the Malinovitz Employment Agreement is in effect on December 31, 2014. The Malinovitz Employment Agreement provides for a 1 year term, ending on October 20, 2015 (the “Malinovitz Employment Term”). Malinovitz’s duties include but are not limited to the marketing of GGH and its products. The Malinovitz Employment Agreement may be terminated by GGH in the event of Malinovitz’ disability, on 90 days written notice by GGH any time after January 1, 2015, for cause as defined in the agreement. The Malinovitz Employment Agreement may be terminated by Malinovitz in the event of a change of control of GGH, constructive termination as defined in the agreement or voluntarily without reason. In the event of termination by GGH except for cause or by Malinovitz voluntarily, Malinovitz is entitled to (a) any accrued and unpaid Guaranteed Salary, payment of any accrued and unused PTO, and payment of two (2) additional weeks of additional Base pay; (b) the issuance of any profit sharing up until date of termination. Malinovitz agreed to refrain from competing with GGH or soliciting its customers and employees during the term of his employment with GGH as well as additional covenants and other provisions that are customary of employment agreements. The Company guaranteed the obligations of GGH under the Malinovitz Employment Agreement. |
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Simultaneously, on the GGH Closing Date, we entered into and completed the closing of a stock purchase agreement with Babadjov and GGH (the “Babadjov SPA”), whereby we agreed to purchase 750 shares of GGH’s common stock from Babadjov, representing 50% of GGH’s outstanding shares, for a total of $900,000.00 (the “Babadjov Purchase Price”). The Babadjov Purchase Price was paid as follows: (i) $800,000.00 to Babadjov and (ii) $100,000.00 (the “Holdback Funds”) to Ingber & Associates (the “Escrow Agent”). In the event that GGH’s final net liquid working capital is less than the NLWC Amount on the GGH Closing Date, the Babadjov Purchase Price will be decreased by 50% multiplied by the difference between $235,000.00 and the NLWC Amount on the GGH Closing Date, with the maximum amount of decrease equal to the Babadjov Holdback Funds. The Babadjov SPA was expressly conditional upon the simultaneous sale by Malinovitz of his 50% interest in GGH to us. The Babadjov SPA also contains additional covenants, representations, warranties, conditions precedent, and other provisions that are customary of stock purchase agreements including Babadjov’s agreement to refrain from competing with GGH for a period of two years after the GGH Closing Date. |
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Upon closing of the above transactions with Malinovitz and Babadjov, we acquired 100% of GGH, and thus GGH is now our wholly-owned subsidiary. Pursuant to the Malinovitz SPA and Babadjov SPA, we assumed GGH’s lease of the property located at 15721 Ventura Boulevard, Encino, California. |
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On October 20, 2014, we appointed Babadjov as Vice President of Operations of GGH, pursuant to an employment agreement (the “Babadjov Employment Agreement”), which provides for a base salary of $120,000.00 annually. The Babadjov Employment Agreement provides for an initial 1 year term (the “Babadjov Initial Term”), and automatic renewal for two successive 1 year terms, unless we give Babadjov notice of termination between 30 and 90 days before the end of the relevant yearly term. We also agreed to pay Babadjov a guaranteed bonus of $250,000.00 payable monthly over the Initial term. In addition, Babadjov is entitled to participate in GGH’s benefit and welfare plans that are generally available to other employees. Babadjov’s duties include but are not limited to overseeing all of GGH’s day-to-day operations, evaluating GGH’s marketing plans and products, and reviewing GGH’s financial performance. Babadjov agreed to refrain from competing with GGH or soliciting its customers and employees during the term of his employment with GGH as well as additional covenants and other provisions that are customary of employment agreements. The Company guaranteed the obligations of GGH under the Babadjov Employment Agreement. |
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Joint Venture |
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On November 25, 2014, the Company entered into a joint venture agreement with Alpha Equity Group, LLC. The joint venture is to be called Gold is Green, LLC. This company plans to acquire commercial real property for lease to growers, processors, manufacturers, sellers and distributors of cannabis products in a manner that is legal under state and local ordinances in all of its legal forms including but not limited to medicinal cannabis. Upon completion of the joint venture agreement, OSL will receive a 49% equity interest in Gold is Green for its identification of zone complaint locations, lease holders, negotiation of purchase and management of leaseholder relationships. Alpha Equity Group will arrange financing for its interest in Gold is Green. Gold is Green signed its first Purchase Sales Agreement on October 31, 2014 to acquire a multi-tenant commercial retail building consisting of approximately 17,692 square feet in Torrance, California for $6.3 million. The building is zone compliant for the operation of a legal medical marijuana collective. The closing on this property is subject to completion of financing, a property inspection and additional conditions, representations and warranties that are customary of real estate purchase and sale agreements. Due to due diligence issues with the property in Torrance, California, prior to the escrow deadline in early December, both parties decided to terminate the Joint Venture until such a time as another viable property can be identified. |