Kid is the licensor. That's why the trademarks were transferred. It's how it is done. The LLC gets 50% but we book all the sales.
We may prepay all or part of the Drinks Debenture upon 10-days prior written notice and are entitled to satisfy a portion of the amount outstanding under the debenture by offset of an amount equal to 125% of the amount owed under the Investor Notes, which amount will satisfy a corresponding portion of the Drinks Debenture. For example, subsequent to receipt of the $375,000 and prior to the receipt of any payments under the Investor Notes, we can satisfy the Drinks Debenture by paying $718,750 to the Investor.
Also as part of this financing, the Investor acquired warrants to purchase 2,500,000 shares of our common stock at an exercise price of $0.35 per share (the “Investor Warrants”). The Investor Warrants contain full ratchet anti-dilution provisions, as to the exercise price and are exercisable for a five year period.
Out of the gross proceeds of this Offering, we paid the placement agent $37,500 in commissions and we are obligated to pay the placement agent 10% of the principal balance of the Investor Notes when each note is paid. We will also issue to the Placement Agent, warrants to acquire 5% of the shares of our Common Stock which we deliver in response to Share Repayment Requests, at an exercise price equal to the Market Price related to the shares delivered in response to the Share Repayment Request (the "Placement Agent Warrants"), which warrants are exercisable for a five year period, will contain cashless exercise provisions as well as anti-dilution provisions in the case of stock splits and similar matters
Our CEO has guaranteed our obligations under the Drinks Debenture in an amount not to exceed the lesser of (i) $375,000 or (ii) the outstanding balance owed under the Drinks Debenture. In addition our CEO, COO, and three other members of our Board of Directors and another of our shareholders, have, either directly, or through entities they control pledged an aggregate of 9,000,000 shares of our common stock to secure our obligations under the Drinks Debenture (the “Pledged Shares”). The Company has pledged an additional 3,000,000 shares of its common stock. The Company has agreed in principle to issue to those individuals who pledged their shares, 0.5 shares of Company stock for each share pledged.
On July 14, 2009 the value of the Pledged Shares fell below the required amount and consequently the Investor delivered a notice of default to the Company. On receipt of the notice the Company requested, and the Investor orally agreed, that the penalties the Company would have incurred would not apply. The agreement was subsequently documented and the Investor also waived the application of this provision through October 31, 2009. In response to the default the Investor to transferred 5,523,645 shares of the Pledged Shares into its own name in order to commence sale thereof to satisfy payment of the Drinks Debenture. Accordingly and upon the Company’s request, Investor agreed to waive its right under an Event of Default.
In order to secure waivers which the investors in our December 2007 financing claimed were required for the Company to consumate this financing (see Note 11), we allowed, and the three December investors elected, to convert an aggregate of $335,800(335.8 shares) of our preferred stock into 3,358,000 shares of our common stock.
In June 2009, in partnership with rock and roll personality, Kid Rock, , the Company formed a limited liability company (LLC) in which it is has a 50% interest and is the managing member. The LLC has the license rights to distribute Kid Rock’s BadAss Beer on a worldwide basis for a term of five years with a option to renew for an additional five years. The license requires the LLC to pay the licensor $0.35 per 24 can case (or equivalent liquid volume) with certain minimum royalties for years 2 through 5 of the agreement payable on the first day of the applicable year. In accordance with the agreement the Company is required to issue an entity controlled by Kid Rock warrants to purchase 100,000 shares of our common stock at an exercise price of $.15 per share which was the market value of our common stock at the closing of the agreement. The warrants are exercisable for a 5 year period. In addition, the Company is required to issue the entity additional warrants based on the sales volume of the product up to additional warrants to purchase 1,000,000 shares of our common stock at an exercise price of $.35 per share. These warrants will also have an exercise period of 5 years.
