Item 3.02 Unregistered Sale of Equity
Securities
On
September 30, 2016,
the Company entered into a Securities Purchase Agreement with Lorton Finance Company (“
Purchaser
”),
an affiliate of Hillair Capital Investments, LP, the Company’s controlling shareholder, pursuant to which it issued a Senior
Secured Debenture Due September 30, 2019 (the “
Debenture
”) to the Purchaser in the aggregate amount of $1,150,000,
payable in full on September 30, 2019. The Debenture bears interest at the rate of 20% per annum, payable monthly beginning March
31, 2017. Beginning September 30, 2017, the Company is obligated to make monthly principal payments of $47,916.67. The repayment
of the Debenture is secured by titles to 19 trucks owned by subsidiaries of the Company.
On or before March
31, 2017, upon mutual agreement of the Company and the Purchaser, the Purchaser may purchase up to an additional $850,000 in principal
amount of the Debentures. Subject to the conditions described below, such additional Debenture (i) shall bear interest at
the same rate and payable on the same dates as the initial Debenture, (ii) shall have a first priority security interest in the
assets being acquired in connection with such additional purchase, and (iii) shall have principal amortization in the same manner
and on the same dates as principal is amortized under the initial Debenture, and shall otherwise be in substantially the form of
the initial Debenture.
In the event the
parties increase the subscription amount as described above, the Company shall issue to the Purchaser a number of shares of Series
B Preferred Stock equal to five percent (5%) of the dollar amount of such increase divided by the then-current Stated Value (currently,
$1,000 per share), and shall amend its Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible
Preferred Stock to provide for an adequate number of such shares of Series B Preferred Stock to permit such issuance (without amending
the terms of the Series B Convertible Preferred Stock). For example, if the subscription amount is increased $850,000 to
the maximum of $2,000,000 on the first anniversary of the issuance of any Series B Preferred Stock, the Company would issue to
the Purchaser 39.36 shares of Series B Preferred Stock (($850,000 in increased Subscription Amount) x (5%) / ($1,000 initial Stated
Value + $80 accrued and unpaid dividends)).
After taking into
account the Purchaser’s legal fees and other expenses and the payment in full of the Company’s line of credit with
State Bank & Trust Company in the amount of $274,954.56, the net proceeds received by the Company was $787,500.
These transactions
are exempt from registration subject to Section 4(2) of the Securities Act of 1933, as amended (the “
Securities Act
”).