Business Context and Reporting Period
This Form 8-K was filed by Envision Solar International, Inc. (not Beam Global) on October 30, 2015. The filing reports the creation of a direct financial obligation through a new credit facility entered into on the same date.
Key Financial Metrics and Obligations
- Debt Facility: A revolving line of credit with an aggregate principal amount of $1,000,000.
- Lender: Silicon Valley Bank.
- Interest Rate: Floating rate equal to the greater of 0.75% above the Prime Rate or 4.00% per annum.
- Collateral: Second priority perfected security interest in all Company assets.
- Upfront Costs: Non-refundable commitment fee of $2,500 and reimbursement of documentation expenses up to $10,000.
- Equity Issuance: Immediate issuance of 571,429 shares of common stock to Keshif Ventures, LLC as consideration for a guarantee.
Material Changes and Agreements
The Company entered into a Loan and Security Agreement (LSA) with Silicon Valley Bank. To secure this credit, Keshif Ventures, LLC provided a Master Unconditional Limited Guaranty and pledged cash equivalent collateral. Keshif also subordinated its existing indebtedness to the Bank. In exchange for the guarantee, the Company issued shares to Keshif and agreed to a Side Letter granting Keshif specific rights, including board observer status and the right to elect a board member if the Company defaults on the LSA.
Outlook, Risks, and Contingencies
- Future Equity Dilution: Keshif is entitled to receive additional shares every six months based on a formula involving 2.5% of the maximum outstanding principal divided by the 20-day average stock price, adjusted for the duration of the guarantee.
- Control Risk: If the Company fails to meet its obligations under the LSA, Keshif gains the immediate right to elect one member to the Board of Directors.
- Reimbursement Obligation: The Company must reimburse Keshif for any payments Keshif makes to the Bank under the guarantee.
Investor Verification Checklist
- Verify the current outstanding balance on the $1,000,000 revolving line of credit.
- Confirm the total number of shares issued to Keshif Ventures, LLC to date, including any subsequent issuances under the six-month measurement formula.
- Review the Company's cash position to assess its ability to service the floating interest rate and potential reimbursement obligations.
- Check for any subsequent filings regarding the subordination of Keshif's existing debt.