Subsequent Events | 6 Months Ended |
Jun. 30, 2014 |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
NOTE 13 – SUBSEQUENT EVENTS |
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On July 15, 2014 Gordon McDougall submitted his resignation from his positions as a member of the Registrant’s Board of Directors and as the Registrant’s Chief Executive Officer, effective on July 16, 2014. On July 16, 2014 the Board of Directors appointed Hubert J. Blanchette to serve as the Registrant’s Chief Executive Officer. Mr. Blanchette is currently a member of the Registrant’s Board of Directors. |
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On July 16, 2014 the Registrant entered into a Share Exchange Agreement with Hubert Blanchette, Paul Koros, Stella Koros, Michael John Koros, Gordon McDougall and Laura Fewrtell. Hubert Blanchette was, on that date, a member of the Registrant’s board of directors. Gordon McDougall was, on that date, a member of the Registrant’s board of directors and the Registrant’s Chief Executive Officer. Laura Fewtrell is Mr. McDougall’s spouse. |
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The transactions contemplated by the Share Exchange Agreement were completed on July 17, 2014. On that date, Mr. Blanchette and the Koros’s transferred to the Registrant all of the capital stock of Lexi-Luu Design, Inc. and released Lexi-Luu Design, Inc. from all accrued liabilities. In exchange, the Registrant issued to them a total of 300,000,000 shares of its common stock. At the same time, Ms. Fewtrell and entities affiliated with Ms. Fewtrell and Mr. McDougall released Lexi-Luu Design, Inc. from all liabilities, including liabilities for money loaned, and the Registrant issued to Ms. Fewtrell and to an affiliate of Mr. McDougall a total of 200,000,000 shares of its common stock. The Share Exchange Agreement provides that additional shares of common stock will be issued to all parties if the annual revenue for any of the current or next two years exceeds the following threshholds: 2014 - $420,000; 2015 - $660,000; 2016 - $780,000. The Share Exchange Agreement also provides that additional shares will be issued to all parties if, during the next 24 months, the Registrant completes a sale of equity securities at a per share price of less than $.0015 for aggregate gross proceeds of $750,000 or more. |
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On July 17, 2014, pursuant to the Share Exchange Agreement, the Registrant entered into an Employment Agreement with Hubert Blanchette. The agreement provides that Mr. Blanchette will serve as Chief Executive Officer of Lexi-Luu Design, Inc. for a term of five years. As compensation for these services, the Registrant agreed to pay Mr. Blanchette a salary of $150,000 per year, except that for the period through May 31, 2015 sixty percent of the salary will be satisfied by issuance of common stock at a per share value of $.0015. The Registrant agreed to issue 50,000,000 common shares to Mr. Blanchette upon his execution of the agreement, which will vest quarterly over two years. The agreement also provides that Lexi-Luu Design, Inc. will pay Mr. Blanchette 5% of the contribution margin realized during the past half year. |
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On July 18, 2014 the Registrant entered into a Share Exchange Agreement with Marilu Brassington, Elaine Cunningham and Leticia Brito. Ms. Brassington is the Registrant’s Chief Financial Officer and a member of the Registrant’s board of directors. |
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The transactions contemplated by the Share Exchange Agreement were completed on July 18, 2014. On that date, the three counterparties transferred to the Registrant all of the capital stock of E-motion Apparel, Inc. In exchange, the Registrant issued to them a total of 350,000,000 shares of its common stock. The Share Exchange Agreement provides that additional shares of common stock will be issued to all parties if the annual revenue of E-Motion Apparel for any of the current or next two years exceeds the following threshholds: 2014 - $270,000; 2015 - $390,000; 2016 - $540,000. The Share Exchange Agreement also provides that additional shares will be issued to all parties if, during the next 24 months, the Registrant completes a sale of equity securities at a per share price of less than $.0015 for aggregate gross proceeds of $750,000 or more. |
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On July 18, 2014, pursuant to the Share Exchange Agreement, the Registrant entered into an Employment Agreement with Marilu Brassington. The agreement provides that Ms. Brassington will serve as the Registrant’s Chief Financial Officer and as Chief Executive Officer of E-motion Apparel, Inc. for a term of five years. As compensation for these services, the Registrant agreed to pay Ms. Brassington a salary of $150,000 per year, except that for the period through May 31, 2015 68% of the salary will be satisfied by issuance of common stock at a per share value of $.0015. The Registrant agreed to issue 50,000,000 common shares to Ms. Brassington upon her execution of the agreement, which will vest quarterly over two years. The agreement also provides that the Registrant will pay Ms. Brassington 5% of the contribution margin realized on sales to current customers of E-motion Apparel. |
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On August 5, 2014 the Registrant filed with the Nevada Secretary of State a Certificate of Designation of 35,750 shares of Series D Preferred Stock, which had been designated by the Registrant’s Board of Directors as authorized by the Registrant’s Articles of Incorporation. The holders of shares of Series D Preferred Stock will have the following rights: |
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| ● | The holder of each share will have the right to cast the number of votes that equals the votes that could be cast by the holder of 10,000 shares of common stock. |
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| ● | In the event of a liquidation of the Registrant, the holder of each share of Series D Preferred Stock will be entitled to a liquidation preference of $.01. |
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| ● | The holder will not participate in any dividend payable to the holders of the common stock |
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On August 4, 2014 the Registrant entered into an Exchange Agreement with Hubert Blanchette, pursuant to which the Registrant issued 20,000 shares of Series D Preferred Stock to Mr. Blanchette and he surrendered 200,000,000 shares of Common Stock. On the same day, the Registrant entered into an Exchange Agreement with Marilu Brassington, pursuant to which the Registrant issued 15,750 shares of Series D Preferred Stock to Ms. Brassington and she surrendered 157,500,000 shares of Common Stock. The two shareholders are the members of the Registrant’s Board of Directors. |
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On August 5, 2014 the Registrant entered into a Securities Purchase Agreement with 112359 Factor Fund, LLC (“Factor Fund”), pursuant to which the Registrant sold to Factor Fund a Secured Convertible Debenture. The Securities Purchase Agreement provides that Factor Fund will make ten payments, commencing with a payment of $80,000 on August 5, 2014, followed monthly by eight payments of $25,000 each and one $20,000 payment (i.e. total payments of $300,000). In exchange for each payment, an obligation in the principal amount equal to twice the payment will accrue and be represented by the Debenture. In addition, a premium of $50,000 will be added to the initial obligation, resulting in a total principal obligation accruing over the next nine months of $650,000. The primary terms of the Debentures are: |
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| ● | Interest will accrue on the principal balance at the lesser of 8% per annum or the applicable federal rate. |
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| ● | Principal and interest on each tranche will be due on the second anniversary of the payment date for that tranche. |
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| ● | The Registrant may prepay the principal amount of the Debenture, in whole or in part, at any time without penalty, and interest that has accrued on the prepaid amount will be waived. |
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| ● | The holder may convert the principal and interest accrued on the Debenture into common stock at a conversion price equal to 100% of the average of the five (5) lowest closing market prices for the common stock for the sixty trading days preceding conversion, but may not convert into a number of shares that would result in the holder owning beneficially more than 9.99% of the Registrant’s outstanding shares. |
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The Registrant’s obligations under the Debenture are secured by a pledge of all of the Registrant’s assets. In addition, Hubert Blanchette and Marilu Brassington, who are officers and directors of the Registrant, have pledged a total of 666 shares of Series C Preferred Stock and 35,750 shares of Series D Preferred Stock to secure the Registrant’s obligations under the Debenture. |
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On August 5, 2014 the Registrant entered into a letter agreement with Factor Fund that modified the terms of the Secured Amended& Restated Convertible Debentures issued by the Registrant to Factor Fund on November 18, 2013 (the “A&R Debentures”). The modifications: |
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| ● | increased the maximum number of shares that Factor Fund can hold upon conversion of the A&R Debentures from 4.99% of the outstanding to 9.99%. |
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| ● | changed the period over which the conversion price will be measured from the 30 trading days preceding conversion to the 60 trading days preceding conversion. |
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| ● | eliminated the restriction on the number of shares of common stock that Factor Fund can sell in a month. |
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| ● | added a provision that the interest rate on the A&R Debentures will increase to 20% per annum in the event of a default. |