VAPOR HUB INTERNATIONAL INC. (OTCMKTS:VHUB) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement
Entry into Asset Purchase Agreement
On February 10, 2017, Vapor Hub International Inc. (the Company)
and PLY Technology, a California corporation (the Buyer), entered
into an asset purchase agreement (the Purchase Agreement). to the
terms and conditions of the Purchase Agreement, the Company
agreed, subject to the approval of its stockholders, to sell all
of the Companys right, title and interest in and to the Companys
proprietary rights, and all goodwill associated with such
proprietary rights, owned or used by the Company in connection
with its business, which collectively constitute substantially
all of the Companys assets (collectively, the Purchased Assets).
The Company will retain all assets that are not Purchased Assets,
including inventory. The Buyer is not assuming any liabilities of
the Company in connection with the sale of the Purchased Assets
by the Company.
The aggregate purchase price for the Purchased Assets is
$1,000,000 USD (the Purchase Price). The Buyer will pay the
Purchase Price to the Company at the closing of the asset sale
(the Asset Sale) by (i) cancelling all outstanding principal,
accrued interest and all other obligations (collectively, the
Outstanding Debt Obligations) payable to the Buyer by the Company
on the closing date of the Asset Sale under that certain Senior
Secured Credit Facility Agreement entered into by the Buyer and
the Company on December 23, 2016 (the Loan Agreement), which
amount currently totals approximately $543,110, and (ii) to the
extent the Purchase Price exceeds the Outstanding Debt
Obligations, paying an amount in cash equal to the difference
between the Purchase Price and the Outstanding Debt Obligations.
The Company expects that the Asset Sale will close in March 2017,
subject to the satisfaction of certain closing conditions, which
include obtaining the approval of the Asset Sale and Plan of
Liquidation (described below) by the Companys stockholders (the
Stockholder Approval).
The Purchase Agreement contains customary representations and
warranties of the parties and covenants of the Company. It also
includes certain termination rights, including, among others,
that either party has a right to terminate the Purchase Agreement
if: (i) the Company receives an Acquisition Proposal (as defined
below) and exercises its right to withhold, withdraw, amend or
modify its approval of the Purchase Agreement before it obtains
Stockholder Approval (a Change in Recommendation); (ii) the
Company does not obtain Stockholder Approval on or before March
30, 2017; or (iii) the closing does not occur on or before March
30, 2017, absent any breach by the terminating party.
The Purchase Agreement provides that, from the date of the
Purchase Agreement until the closing of the Asset Sale or the
proper termination of the Purchase Agreement, (i) the Buyer has
the sole and exclusive right to negotiate an Acquisition Proposal
with the Company and (ii) neither the Company nor its
representatives are permitted to solicit, initiate negotiations
with, or enter into any agreement with a third party in relation
to an Acquisition Proposal, in each case subject to certain
exceptions relating to unsolicited Acquisition Proposals from
third parties. Acquisition Proposal means any proposal, offer or
indication of interest relating to, or that would reasonably be
expected to lead to, (i)any acquisition or purchase of (A)assets
or businesses that constitute all or substantially all of the
Companys assets, or (B)beneficial ownership of twenty percent
(20%) or more of any class of the Companys equity securities;
(ii)any purchase or sale of, or tender offer or exchange offer
for, the Companys equity securities that, if consummated, would
result in any person or group beneficially owning twenty percent
(20%) or more of any class of the Companys equity securities; or
(iii)any merger, consolidation, business combination,
recapitalization, reorganization, dual listed structure, joint
venture, share exchange or similar transaction involving the
Company, as a result of which the owners of the Companys equity
securities immediately prior to such event own less than 80% of
the Companys equity securities immediately following such event;
or (iv)the Companys liquidation or dissolution.
If the Company closes the Asset Sale, the Company will cease to
do business and will not engage in any business activities except
for dealing with post-closing matters and for the purpose of
liquidating its remaining assets, paying or making provision for
the payment of any debts and obligations of the Company,
distributing any remaining assets to stockholders and doing other
acts required to liquidate and wind up its business and affairs.
The winding up and liquidation of the Company will occur to a
Plan of Liquidation (the Plan of Liquidation), which will be
submitted to the Companys stockholders for approval.
The foregoing description of the Purchase Agreement is
qualified in its entirety by reference to the full text of the
Purchase Agreement, a copy of which is filed as Exhibit 2.1 to
this Current Report on Form 8-K and is incorporated herein by
reference.
APPROVAL OF THE ASSET SALE AND PLAN OF LIQUIDATION WILL BE
SUBMITTED TO THE COMPANYS STOCKHOLDERS FOR THEIR CONSIDERATION,
AND THE COMPANY WILL FILE A DEFINITIVE PROXY STATEMENT TO BE
USED TO SOLICIT STOCKHOLDER APPROVAL OF EACH OF THE ASSET SALE
AND PLAN OF LIQUIDATION WITH THE SECURITIES EXCHANGE COMMISSION
(THE SEC). A FREE COPY OF THE DEFINITIVE PROXY STATEMENT, AS
WELL AS OTHER FILINGS WITH THE SEC CONTAINING INFORMATION ABOUT
THE COMPANY, THE ASSET SALE AND THE PLAN OF LIQUIDATION MAY BE
OBTAINED, WHEN AVAILABLE, AT THE SECS WEBSITE AT WWW.SEC.GOV.
THE COMPANYS STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE
PROXY STATEMENT REGARDING THE ASSET SALE AND PLAN OF
LIQUIDATION WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT
DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. THE COMPANY, ITS DIRECTORS AND EXECUTIVE
OFFICERS MAY BE DEEMED TO BE PARTICIPANTS IN THE SOLICITATION
OF PROXIES FROM THE COMPANYS STOCKHOLDERS IN CONNECTION WITH
THE APPROVAL OF THE ASSET SALE AND PLAN OF LIQUIDATION.
INFORMATION ABOUT THE DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY IS SET FORTH IN ITS ANNUAL REPORT ON FORM 10-K FOR THE
MOST RECENTLY ENDED FISCAL YEAR, WHICH WAS FILED WITH THE SEC.
INVESTORS MAY OBTAIN ADDITIONAL INFORMATION REGARDING THE
INTEREST OF SUCH PARTICIPANTS BY READING THE PROXY STATEMENT
REGARDING THE ASSET SALE AND PLAN OF LIQUIDATION WHEN IT
BECOMES AVAILABLE.
Amendment to Credit Agreement
On February 10, 2017, in connection with the entry into the
Purchase Agreement, the Company and the Buyer entered to an
amendment to the Loan Agreement to extend the maturity date of
the loan facility from February 15, 2017 to March 30, 2017 (the
Amendment). At any time prior to the maturity date or the
earlier termination of the Loan Agreement, the Company can
request up to $331,899.70 of additional loans, which additional
loans may be made in the sole discretion of the Buyer. The
Company may prepay borrowings at any time, in whole or in part,
without penalty, with the Buyers prior written consent.
In the event the Company is in default under the Loan Agreement
or any related transaction document, including as a result of a
default in the Companys payment obligations and further
including as a result of making a Change in Recommendation, any
amount due to the Buyer under the loan facility will, at the
Buyers option, bear interest from the date due until such past
due amount is paid in full at an annual default rate of 22%. In
addition, upon the occurrence and during the continuance of an
event of default under the loan documents, the Buyer may
terminate its commitments to the Company and declare all of the
Companys obligations to the Buyer under the loan facility to be
immediately due and payable.
The payment and performance of all the Companys indebtedness
and other obligations to the Buyer, including all borrowings
under the Loan Agreement and related agreements, are secured by
first priority liens on substantially all of the Companys
assets to a Security Agreement. Upon the occurrence and during
the continuance of an event of default under the transaction
documents, the Buyer may, at its option, exercise a number of
remedies as a secured lender including selling, leasing or
disposing all or a portion of the Companys assets (including
the Purchased Assets) or retaining all or a portion of the
Companys assets (including the Purchased Assets) in
satisfaction of the Companys obligations to the Buyer.
In connection with the Loan Agreement, on December 23, 2016,
the Company entered into a consulting agreement with the Buyer
(the Consulting Agreement), to which the Company will
assist the Buyer in connection with the operation of its
business, which includes the sale of e-cigarette products and
services, and granted to the Buyer a non-exclusive license to
use the Companys intellectually property rights in connection
with the marketing, sale and distribution of products developed
as a result of the Companys services to the Buyer. Unless
earlier terminated, the Consulting Agreement is scheduled to
expire on June 30, 2017. For the Companys services under the
Consulting Agreement, the Company received a fee of $25,000 on
December 23, 2016.
The foregoing summaries of the Loan Agreement, the Security
Agreement, the Note, the Consulting Agreement and the Amendment
do not purport to be complete and are qualified in their
entirety by reference to the full text of such agreements,
which are filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5
hereto.
Item 2.02 Results of Operations and Financial
Condition
During the three month period ended December 31, 2016, the
Company had total net revenues of approximately $769,532
compared to $1,295,138 for the three month period ended
December 31, 2015. For the six month period ended December 31,
2016, the Company had total net revenues of approximately
$3,264,755 compared to $3,257,483 for the six-month period
ended December 31, 2015. As of December 31, 2016, the Companys
cash balance was approximately $21,000.
Item 9.01 Financial Statements and
Exhibits
(d)
Exhibits.
The following exhibits are filed herewith:
|
Exhibit Number |
Description of Exhibit |
|
|
2.1 |
Asset Purchase Agreement by and between Vapor Hub |
|
|
10.1 |
Senior Secured Credit Facility Agreement dated December |
|
|
10.2 |
Security Agreement dated December 23, 2016 by and between |
|
|
10.3 |
Senior Secured Convertible Promissory Note dated December |
|
|
10.4 |
Consulting Agreement dated December 23, 2016 by and |
|
|
10.5 |
Amendment Number One to Senior Secured Credit Facility |
|
________
(1) The exhibits and schedules to the Asset Purchase Agreement
have been omitted to Item 601(b) of Regulation S-K. A copy of
the omitted exhibits and schedules will be furnished to the
U.S. Securities and Exchange Commission upon request.
About VAPOR HUB INTERNATIONAL INC. (OTCMKTS:VHUB)
Vapor Hub International Inc. is engaged in designing, sourcing, marketing and selling of smokeless electronic cigarettes. The Company provides a selection of vaping devices and related accessories, which it designs and sources, including its Limitless Mods and Limitless Atomizers. It also purchases vaping devices and related accessories from third parties for resale. It distributes products nationally and internationally to wholesale customers and retail customers, including through its Website www.vapor-hub.com. It also markets and sells products through a retail location. Its Limitless Mechanical Mod is available in aluminum, brass, copper, black rhodium plated aluminum and gold plated brass finishes. Its Binary Premium e-liquid is available in over five flavors. It offers Binary Premium e-liquid with 0 milligrams (mg), 2.5mg, 5.0mg, 7.5mg or 10mg of nicotine per bottle. It also offers a range of accessories, including apparel, tanks and atomizers, batteries, chargers and drip tips. VAPOR HUB INTERNATIONAL INC. (OTCMKTS:VHUB) Recent Trading Information
VAPOR HUB INTERNATIONAL INC. (OTCMKTS:VHUB) closed its last trading session down -0.00942 at 0.00990 with 8,685,048 shares trading hands.
