VEXP » Topics » 8. SUBSEQUENT EVENTS

This excerpt taken from the VEXP 10-Q filed Feb 17, 2006.

8. SUBSEQUENT EVENTS

 

On February 3, 2005 the Company agreed to resolve litigation pending with Nextel of Texas, Inc. in which the Company claimed that Nextel’s invoices contained significant overcharges. Nextel claimed that the Company owed in excess of $1.3 million for phone services. Under the settlement, the parties are to dismiss all claims against the other and the Company will pay Nextel $700,000, payable in fourteen equal monthly payments, with the first payment due April 1, 2006. Such amounts have been present valued and accrued on the Company’s financial statements. A formal settlement to document the terms agreement is being drafted. Once this settlement has been formalized the Company will pursue the required bank waiver to allow for assumption of the debt, as the level of debt assumed would otherwise result in a debt covenant violation.

 

On February 16, 2006, the Company’s Senior Lender released $2.0 million of previously restricted availability after receiving a limited guarantee in the amount of $2.0 million from one of the Company’s investors, TH Lee Putnam Ventures (“THLPV”). THLPV received no compensation, consideration or promises from the Company in exchange for providing the guarantee.

 

This excerpt taken from the VEXP DEF 14A filed Jan 9, 2006.

7. SUBSEQUENT EVENTS

 

    New Equity Investments

 

Series P Convertible Preferred Stock—On October 14, 2005, the Company entered into Stock Purchase Agreements (the “Purchase Agreements”) with one group of institutional investment funds and one accredited investor (the “Investors”). The Purchase Agreements provide for the private placement of 3,099,513 shares of a newly authorized series of the Company’s preferred stock (the “Series P Preferred”) in exchange for aggregate gross proceeds of $10,352,370. The Series P Preferred has a term of three years (the “Term”) and is entitled to receive a dividend at the rate of 8% per annum of the Series P Preferred stated value, payable quarterly, in cash or PIK shares of Series P Preferred at the option of the Company. Under certain events of default, the dividend rate will convert to 18%. To the extent that the issuance of such PIK shares would result in the Company issuing in excess of 20% of its outstanding Common Stock, the issuance will require the prior approval of the Company’s shareholders. Upon any liquidation, dissolution or winding up of the Company, the Investors of the

 

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shares of Series P Preferred shall rank on parity with the holders of the Company’s Series M Preferred Stock. Each of the Investors has the right, at its option at any time, to convert any shares of Series P Preferred into shares of Common Stock at the conversion price of $3.34 per share subject to certain adjustments. At any time after the effective date of the Registration Statement and (i) prior to the Term, or (ii) upon a Change of Control, the Company shall have the right, but not the obligation, to redeem all or a portion of the shares of Series P Preferred by tendering to the Holder 130% of the stated value of the outstanding Series P Preferred together with all accrued dividends. At the Term, the Company shall have the right, but not the obligation, to redeem all or a portion of the shares of Series P Preferred by tendering to the Holder 100% of the Conversion Price together with all accrued but unpaid dividends. In the event that the Company elects to redeem the Series P Preferred prior to the Registration Statement becoming effective, the Company may redeem the Series P Preferred by paying to the Investor the greater of: (1) 130% of the outstanding stated value of the Series P Preferred plus accrued dividends, and (2) 100% of the stated value of the Series P Preferred plus all accrued dividends, plus 50% of the difference between the conversion price then in effect and the average closing price of the Company’s Common Stock for the 30 calendar days preceding such redemption. Each Investor also received an A Warrant and B Warrant, each to purchase up to 20% of the amount of Series P Preferred purchased. The exercise of the A Warrant and B Warrant are subject to the prior approval of the Company’s shareholders. The exercise price for both warrants is $4.00, subject to adjustments. Additionally, the B Warrant is only exercisable in the event that a registration statement, allowing for the sale of the Series P Preferred, is not declared effective within 270 days of closing. The Company has the option to redeem both warrants in the event that the Company’s common stock maintains a closing price of at least $7.00 for twenty consecutive trading days. The Investors are also parties to a Registration Rights Agreement (the “Rights Agreement”). The Rights Agreement requires the filing of a registration statement no later than 90 days after the closing date, and that it be effective within 180 days.

 

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

VELOCITY EXPRESS CORPORATION AND SUBSIDIARIES

 

In accordance with the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995, the Company notes that certain statements in this Form 10-Q and elsewhere that are forward-looking and that provide other than historical information, involve risks and uncertainties that may impact the Company’s results of operations. These forward-looking statements include, among others, statements concerning the Company’s general business strategies, financing decisions, and expectations for funding capital expenditures and operations in the future. When used herein, the words “believe,” “plan,” “continue,” “hope,” “estimate,” “project,” “intend,” “expect,” and similar expressions are intended to identify such forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, no statements contained in this Form 10-Q should be relied upon as predictions of future events. Such statements are necessarily dependent on assumptions, data or methods that may be incorrect or imprecise and may be incapable of being realized. The risks and uncertainties inherent in these forward-looking statements could cause results to differ materially from those expressed in or implied by these statements.

 

Readers are cautioned not to attribute undue certainty to the forward-looking statements contained herein, which speak only as of the date hereof. The information contained in this Form 10-Q is believed by the Company to be accurate as of the date hereof. Changes may occur after that date, and the Company will not update that information except as required by law in the normal course of its public disclosure practices.

 

This excerpt taken from the VEXP 10-Q filed Nov 21, 2005.

7. SUBSEQUENT EVENTS

 

    New Equity Investments

 

Series P Convertible Preferred StockOn October 14, 2005, the Company entered into Stock Purchase Agreements (the “Purchase Agreements”) with one group of institutional investment funds and one accredited investor (the “Investors”). The Purchase Agreements provide for the private placement of 3,099,513 shares of a newly authorized series of the Company’s preferred stock (the “Series P Preferred”) in exchange for aggregate gross proceeds of $10,352,370. The Series P Preferred has a term of three years (the “Term”) and is entitled to receive a dividend at the rate of 8% per annum of the Series P Preferred stated value, payable quarterly, in cash or PIK shares of Series P Preferred at the option of the Company. Under certain events of default, the dividend rate will convert to 18%. To the extent that the issuance of such PIK shares would result in the Company issuing in excess of 20% of its outstanding Common Stock, the issuance will require the prior approval of the Company’s shareholders. Upon any liquidation, dissolution or winding up of the Company, the Investors of the shares of Series P Preferred shall rank on parity with the holders of the Company’s Series M Preferred Stock. Each of the Investors has the right, at its option at any time, to convert any shares of Series P Preferred into shares of Common Stock at the conversion price of $3.34 per share subject to certain adjustments. At any time after the effective date of the Registration Statement and (i) prior to the Term, or (ii) upon a Change of Control, the Company shall have the right, but not the obligation, to redeem all or a portion of the shares of Series P Preferred by tendering to the Holder 130% of the stated value of the outstanding Series P Preferred together with all accrued dividends. At the Term, the Company shall have the right, but not the obligation, to redeem all or a portion of the shares of Series P Preferred by tendering to the Holder 100% of the Conversion Price together with all accrued but unpaid dividends. In the event that the Company elects to redeem the Series P Preferred prior to the Registration Statement becoming effective, the Company may redeem the Series P Preferred by paying to the Investor the greater of: (1) 130% of the outstanding stated value of the Series P Preferred plus accrued dividends, and (2) 100% of the stated value of the Series P Preferred plus all accrued dividends, plus 50% of the difference between the conversion price then in effect and the average closing price of the Company’s Common Stock for the 30 calendar days preceding such redemption. Each Investor also received an A Warrant and B Warrant, each to purchase up to 20% of the amount of Series P Preferred purchased. The exercise of the A Warrant and B Warrant are subject to the prior approval of the Company’s shareholders. The exercise price for both warrants is $4.00, subject to adjustments. Additionally, the B Warrant is only exercisable in the event that a registration statement, allowing for the sale of the Series P Preferred, is not declared effective within 270 days of closing. The Company has the option to redeem both warrants in the event that the Company’s common stock maintains a closing price of at least $7.00 for twenty consecutive trading days. The Investors are also parties to a Registration Rights Agreement (the “Rights Agreement”). The Rights Agreement requires the filing of a registration statement no later than 90 days after the closing date, and that it be effective within 180 days.

 

This excerpt taken from the VEXP 10-Q filed Feb 14, 2005.

8. SUBSEQUENT EVENTS

 

    New Equity Investments

 

Series M Convertible Preferred Stock – On December 21, 2004, the Company entered into a Purchase Agreement (“Purchase Agreement”) with certain institutional and accredited investors (“Investors”). Under the Purchase Agreement, the Company issued on December 21, 2004, 6% Convertible Notes (“Notes”) in the aggregate principal amount of $21,000,000, which will be convertible into Series M Preferred Stock of the Company upon stockholder approval of an increase in the Company’s authorized share capital, a reverse stock split of the Company’s Common Stock and certain other matters. Under the Purchase Agreement, the Company may also sell up to an additional $2,000,000 in principal amount of the Notes (“Additional Notes”) under the terms of the Purchase Agreement for up to 30 days after the December 21, 2004 (“Additional Note Sale Period”). By January 27, 2005, all of the Investors have consented to extending the Additional Note Sale Period until January 31, 2005. However, the Purchase Agreement was not formally amended. The Company sold an additional $1,910,000 in principal amount of the Additional Notes on January 31, 2005 in a private placement to certain holders of its Preferred Stock. Mr. Alexander Paluch, a member of the Company’s Board of Directors, purchased $40,000 of the Additional Notes and East River II, LP, an investment fund for which Mr. Paluch serves as a General Partner, purchased $250,000 of the Additional Notes in this offering.

 

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The Additional Notes have exactly the same terms as the Notes and will bear interest at a rate equal to 6.0% per annum and mature and become due and payable on the earlier of (i) April 30, 2005 or (ii) the date on which the Company’s stockholder vote not to approve the conversion of the Notes and Additional Notes into Series M Preferred. The Additional Notes may not be repaid by the Company prior to maturity. Upon a Change of Control (as defined in the Additional Notes), the Company must repurchase the Additional Notes at the option of each holder. The Additional Notes will convert automatically into shares of Series M Preferred Stock upon stockholder approval of the transaction pursuant to the Purchase Agreement and certain other matters. The conversion price per share for the Additional Notes equals $0.0737 multiplied by a fraction, the numerator of which is the number of shares of the Company’s Common Stock, on a fully-diluted basis (including Common Stock and debt, preferred stock, rights options and warrants convertible into or exchangeable for Common Stock (but excluding options or warrants with an exercise price of $0.51 per share or more)) existing on December 21, 2005, and the denominator of which is the number of shares of the Company’s Common Stock on a fully-diluted basis existing as of the conversion date. Any fractional shares of Series M Preferred resulting from this conversion shall be cashed and no fractional share of Series M Preferred shall be issued. Upon the occurrence of an “Event of Default,” as defined in the Additional Notes, all unpaid principal and accrued interest under the Additional Notes shall automatically become immediately due and payable if the Event of Default is triggered by the Company becoming bankrupt or insolvent. If the Event of Default is triggered by reasons other than the Company becoming bankrupt or insolvent, all unpaid principal and accrued interest under the Additional Notes shall become immediately due and payable upon the election of the holder of the Additional Notes.

 

Subsequent to formal shareholder approval, if voted, at the shareholders’ meeting scheduled for February 14, 2005 in Connecticut, the amounts of the total Series M Preferred investment less related costs, approximating $23 million and $2 million, respectively, will be classified on the Company’s balance sheet as components of shareholders’ equity. The Series M Preferred is deemed to contain a beneficial conversion amounting to $23 million which will be recognized as a charge against net income (loss) available to common shareholders at the time that the notes convert to equity.

 

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