Florida companies face SEC probe

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EESO’s Third Wrap Agreement with K&L and Second Wrap Agreement with Signature Worldwide: EESO and Hochstedler entered into new wrap-around agreements with Signature Worldwide on June 5, 2009 and with K&L on June 8, 2009, based upon accrued salary and debt owed to Hochstedler from March 1, 2008 and April 30, 2007, respectively. Both agreements provide for conversions at a 75% discount off the market price of the stock on the date before conversion. Instead of attaching promissory notes promising to pay some amount in the future, Signature Worldwide and K&L agreed to make cash payments of $1,655,882 and $500,000, respectively. (See App. ¶¶ 31, 50.)

Buckwheat Holdings, LLC – another company controlled by Carnes – paid Hochstedler $700,000 on June 25, 2009, and K&L paid Hochstedler $500,000 on June 8, 2009. (See App. ¶¶ 32, 51.) On July 6, 2009, EESO processed conversions under each agreement resulting in 200,000,000 shares being issued separately to Signature Worldwide and K&L to supposedly discharge $165,000 of debt under each agreement. The value of the conversion shares issued, as calculated under the convertibility provisions, equaled the $165,000 in discharged debt. (See App. ¶¶ 34, 54.) K&L sold 150,000,000 of the shares issued within twenty-two days (See App. ¶ 35), and Signature Worldwide sold all of its shares within seventeen days (See App. ¶ 55.).

When combined, the agreements encompassed $3,271,517 in debt owed to Hochstedler. (See App. ¶¶ 11, 22, 31, 38, 50.) EESO issued 2,268,551,872 shares to K&L and Signature Worldwide to allegedly discharge $952,635 of the total debt. (See App. ¶¶ 16, 26, 34, 42, 54.) The actual value of this debt, however, as calculated under the convertibility provision of the agreements, was $5,694,796. (See id.) Within sixty days of receiving the conversion shares, K&L and Signature Worldwide sold the conversion shares for proceeds totaling at least $6,662,655. (See App. ¶¶ 21, 28-29, 45.) K&L and Signature Worldwide sent $346,135 to EESO and $1,445,000 to Hochstedler. (See App. ¶¶ 30, 32, 46, 51.) By July 31, 2009, or when K&L and Signature Worldwide had sold nearly all of the conversion shares issued by EESO, 86% of the EESO stock outstanding in the public market was attributable to the wrap-around agreements. (See App. ¶¶ 56-57.)

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