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v2.3.0.11
SUBSEQUENT EVENTS
6 Months Ended
Jun. 30, 2011
Subsequent Events [Text Block]

NOTE 13 – SUBSEQUENT EVENTS


We are currently in the process of raising capital through a private placement sale of common stock dated July 27, 2011, which outlines the sale of up to 2,200,000 shares of common stock at $5 per share for an aggregate of up to $11,000,000. This placement has similar terms as the memorandum dated January 28, 2011 and updates the private placement memorandum with recent corporate developments occurring since January 2011. As of the date of this filing, we have raised and collected $20,000 as a result of this private placement sale of equity.


On July 11, 2011, the Company and its recently formed subsidiary, namely, 11 Good Energy Sciences, Inc. (hereinafter referred to as “Sciences”) entered into a Stock Purchase Agreement (the “Agreement”) to acquire 100% of the outstanding capital stock of KAI BioEnergy Corp. from the stockholders of KAI (collectively hereinafter referred to as the “Sellers”). Sciences agreed to pay to the Sellers and the Placement Agent, Oracle Capital LLC, the following:


 

 

$300,000 in cash paid to Sellers and $330,000 paid in cash to Oracle;

a 36% interest in Sciences paid to Sellers and a 4% interest in Sciences paid to Oracle;

reimburse Seller’s legal fees up $53,000;

payment at closing of the liabilities of KAI based upon a closing balance sheet up to a maximum of $180,000, it being understood that any liabilities above $180,000 are at the sole and absolute discretion and written consent of Sciences; and

an Earn-Out of $3.3 million (the “Earn-Out”) in the event KAI on or before November 11, 2013, subject to possible extension in the event of financing delays, is able to prove the viability of producing the aerial productivity equivalent of 3,000 gallons per acre, per year of oil from microalgae.


The closing condition of the Agreement is the funding of Sciences with at least $1.1 million by the Company on or before August 3, 2011. These funds would be utilized to meet Sciences’ obligations which are specified above and the balance will be allocated primarily for research and development of KAI. The Agreement has a post closing condition that the Company will raise and contribute to the capital of Sciences at least $2.2 million in accordance with a schedule over a period of approximately two years. Such funding must timely occur to avoid any dilution (up to a maximum of two-thirds) in ownership interest of Sciences. In connection with the Agreement, the Company will enter into employment agreements as well as a non-compete, non-solicitation and non-disclosure agreement with the two stockholders of KAI. These agreements will be for a period of two years, subject to possible extension as provided in the agreements.


Extension of Agreement


To date, the Company has paid Kai an aggregate of $312,000 to extend the closing date to September 7, 2011. On September 9, 2011, Sciences and Sellers agreed to extend the closing date to September 14, 2011. All option payments are non-refundable, but shall be credited towards the $1.1 million closing condition referenced in the preceding paragraph.


Buy-Out Option


In the event that Sellers receive the Earn-Out, Sciences has the option to buy-out Seller’s and Oracle’s collective 40% Common Stock position at a cost of $13.2 million, payable in cash or under certain specified conditions in the Company’s Common Stock. Sellers and Oracle have the right to refuse the Buy-Out on up to one-half of their position.


About KAI BioEnergy Corp.


Kai is a research and development company developing a platform series of technologies that enable efficient and integrated continuous microalgal processing. Focusing on the economics and development of an industrially scalable processing system, KAI has been working on developing a platform system that directly extracts oil from a water based algal-cultivation medium, ultimately separating the “oil-rich” lipids, biomass, and water medium. A biofuel company can then take these oil-rich lipids and use them to produce algal biofuels. KAI’s integrated continuous high flow system is expected to offer low capital costs, ultra-low operating costs with no additives or hazardous chemicals required, ultimately developing industrial scalability.


On July 22, 2011, the Company borrowed $100,000. In connection with this transaction, a note payable in the principal amount of $100,000 was issued and is convertible to common stock at $5.00 per share. The Company also issued two-year Warrants to purchase 25,000 shares of Common Stock exercisable at $5.00 per share at any time from the date of issuance through June 30, 2013.


On August 5, 2011, the Company borrowed $100,000 from a director of the Company. In connection to this transaction, the Company issued a note payable in the principal amount of $100,000 and warrants to purchase 100,000 shares of common stock exercisable for $3.00 per share. In addition, the note carries the right for the holder to vote the common stock of 11 Good Energy Sciences, Inc until the note is paid in full.


On August 12, 2011, the Company borrowed $68,000 from a director of the Company. In connection to this transaction, the Company issued a note payable in the principal amount of $68,000 and warrants to purchase 40,000 shares of common stock exercisable for $3.00 per share. With the exception of the warrants issued, the note carries the same terms and conditions as the August 5, 2011 note payable.


On August 19, 2011, the Company borrowed $68,000 from a director of the Company. In connection to this transaction, the Company issued a note payable in the principal amount of $68,000 and warrants to purchase 40,000 shares of common stock exercisable for $3.00 per share. The note carries the same terms and conditions as the August 12, 2011 note payable.


On September 1, 2011, the Company entered into a Letter of Intent for a joint venture to sell G2 Diesel in Mexico, subject to regulatory approval in Mexico and entering into definitive joint venture agreements to supply the biofuel component of the fuel blend (which blend is expected to be 5% biofuel) required for 500 buses in Mexico for at least 30 days of projected operation and then to gradually increase the order to supply the biofuel component for up to 3,000 buses. In the event that a definitive agreement is entered into, approximately $320,000 would be paid by the Company to cover setup costs of the joint venture project. We can provide no assurance that a definitive agreement for the proposed joint venture project will be entered into on terms satisfactory to us, if at all. As a part of this agreement, the Company’s Chief Executive Officer, Frederick C. Berndt, has entered into two private agreements to purchase an aggregate of 100,000 shares from two stockholders at a total purchase price of $300,000. Separately, the Company has agreed to purchase the same 100,000 shares from the investors in the event that the Company raises at least $1,500,000 (the “Financing Condition”) on or before September 30, 2011 and in the event that Mr. Berndt has not completed the purchases before the Financing Condition has been completed.


On September 8, 2011, the Company entered into an agreement with a non-affiliated investor to loan $200,000 to the Company, which is convertible to common stock at $5.00 per share and repayable to the investor on a maturity date of March 8, 2012. Interest at the rate of 11% per annum is payable on December 8, 2011 and the balance at maturity. The lender also received three year warrants to purchase 180,000 shares, exercisable at $3.00 per share at any time over the life of the warrants.