UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): July 15, 2009
STRATOS
RENEWABLES CORPORATION
(Exact
name of registrant as specified in its charter)
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Nevada
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20-1699126
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State
or other jurisdiction of incorporation or
organization
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I.R.S.
Employer Identification Number
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9440
Santa Monica Blvd., Suite 401
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Beverly
Hills, California
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90210
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Address
of principal executive offices
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Zip
Code
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(310)
402-5901
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Issuer’s
telephone number
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Item1.01
Entry into a Material Definitive Agreement.
A Secured
Note And Common Stock Purchase Agreement (the “Agreement”) was made on July 15,
2009, by and between Stratos Renewables Corporation, a Nevada corporation (the
“Company”), I2BF Biodiesel, Ltd. (“I2BF”) and of Blue Day SC Ventures, a joint
venture of BlueDay Limited, a business company existing under the laws of the
British Virgin Islands and MA Green, a partnership (“Blue Day SC Ventures”)
(each, an “Investor” and collectively, the “Investors”). MA Green is a pre-existing
affiliate of the Company.
The
Company offered to the Investors: (a) a minimum of $3,000,000 in aggregate
principal of Secured Promissory Notes (“Notes”) issued for new cash investment
in the Company as of the date of the Agreement (the “Initial Investment”),
(b) $12,382,271 in aggregate principal amount of Notes issued concurrently
with the Initial Investment in exchange for the surrender and cancellation of
existing indebtedness and equity securities of the Company outstanding in favor
of Investors as set forth opposite such Investors’ names on the Schedule of
Investors attached to the Agreement (the “Tendered Securities”), (c) up to
an additional $1,725,000 principal amount of Notes issued to I2BF in a
subsequent closing, each in the allocations and amounts set forth on the
Schedule of Investors and (d) as consideration for such new investment and
the restructuring of the Tendered Securities, Common Stock representing an
aggregate of forty five percent (45%) of the fully diluted equity of the Company
and certain adjustment rights relating to such Common Stock as are set forth in
the Agreement.
The
principal amount of the Notes described in subsection (b) of the paragraph above
is in substitution for and wholly replaces earlier notes issued to I2BF and MA
Green, Inc. and, accordingly, the terms of the Notes supersede all of the
Company’s prior indebtedness to those investors.
The first
Closing on July 15, 2009 (the “Initial Closing”) was for the sale of Notes in
the aggregate principal amount of $15,382,271 and an aggregate of 55,586,157
shares of the Common Stock of the Company, evidencing not less than 39.895% of
the outstanding the Common Stock determined on a fully diluted basis, and shall
be consummated simultaneously with the execution of the Agreement (the “Closing
Date”).
I2BF is
required to make an additional investment in Notes with an aggregate principal
amount of $1,725,000 and shall be issued 10,238,381 additional shares of Common
Stock, and an additional Closing shall be held with respect to such investment
(the “Balance Closing”) if and as soon as practicable following the closing of
the credit facility currently under negotiation between the Company and Banco
Internacional del Perú S.A.A. (“Interbank”) and evidenced by that certain letter
of intent dated May 29, 2009 (the “Interbank Facility”),
provided
that the
Interbank Facility shall provide credit to the Company and its subsidiaries of
not less than $15,000,000 and shall otherwise be upon terms and conditions as
set forth in that certain letter of intent referenced above or upon terms and
conditions substantially similar to such terms and conditions, subject to the
reasonable approval of Investors, it being agreed and acknowledged that the
“Interbank Facility” may be consummated with another lender substituted for
Interbank, subject to such requirements regarding the substantive terms and
conditions. The obligation (but not the right) of I2BF to participate
in the Balance Closing shall cease in the event that the Interbank Facility is
not closed by October 15, 2009. An additional Note shall be
issued to I2BF and certificate(s) evidencing the additional shares of Common
Stock issuable to I2BF and Blue Day SC Ventures shall be issued with respect to
the Securities purchased and issued at the Balance Closing. The
respective ownership of I2BF and Blue Day SC Ventures following the Balance
Closing shall be 25% and 20% respectively, each in the fully diluted ownership
of the Company.
The
Agreement contains certain other covenants and agreements including requirements
concerning use of proceeds in part with respect to construction and development
of business activities for the Company’s industrial plot and sugarcane crushing
assets in Chepen, Peru (the “Chepen Project”). The entity directly
owning and operating the Chepen Project is referred to as the “Chepen Operating
Company.”
Proceeds
from the financing also were directed to the repayment of $2,000,000 in
principal owed by the Company to Whitebox Capital Partners, L.P.
(“Whitebox”). Effective as of the closing of the financing, all of
the Company’s obligations to Whitebox were finally and effectively satisfied and
extinguished, including warrants formerly held by Whitebox.
The
Agreement also provides that for a period of five (5) years from and after the
date that all Obligations (as defined in the Notes) with respect to the Notes
are satisfied (the “Cash Flow Payment Term”), Blue Day SC Ventures or its
designee shall be entitled to receive payments (the “Participation Payments”)
from the Chepen Operating Company equal to fifteen percent (15%) of the Excess
Cash Flow (as defined in the Agreement) of the Chepen Operating
Company. Such payments from Excess Cash Flow shall be made quarterly
in arrears no later than ten (10) days after the end of each
quarter. In the event that there has not been a Change of Control (as
defined in the Agreement) of the Company or the Chepen Operating Company during
the Cash Flow Payment Term, then Blue Day SC Ventures’ right to receive
Participation Payments automatically shall be extended for one additional
year. In the event that there is a Change of Control of the Company
or the Chepen Operating Company during the initial Cash Flow Payment Term, Blue
Day SC Ventures will be entitled to receive a one time payment in the amount
equal to fifteen percent (15%) of eighty percent (80%) of the projected Excess
Cash Flow from the Chepen Project for the remaining portion of the Cash Flow
Payment Term.
The
Agreement provides for the issuance of additional Shares in the event that third
party investors in the Additional Chepen Financing receive, individually or in
the aggregate and in one or a series of transactions, an equity position or
equity participation in the Chepen Operating Company of greater than twenty
(20%) on a fully diluted basis
The
Agreement provides for certain Piggyback Registration Rights and Antidilution
protection.
The
Company simultaneously entered into a Security Agreement creating first priority
security interests in favor of Investors over all of the assets of the Company
and its Subsidiaries; provided, however that the Investors agreed to subordinate
their security interests to Interbank if and when the Interbank Facility
closes.
Item 2.03.
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
In
connection with the Agreement, the Company signed two Secured Promissory Notes
(“Notes”):
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to
Blue Day in the principal amount of Eight Million Six Hundred Fifty Nine
Thousand Seven Hundred Nineteen Dollars
(US$8,659,719)
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to
I2BF in the principal amount of Six Million Seven Hundred Twenty Two
Thousand Five Hundred Fifty One Dollars
(US$6,722,551)
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The Notes
bear interest at fifteen percent (15%) per annum.
Of the
principal amount of the Notes, $12,382,271 was issued in substitution for and
wholly replacing earlier notes issued to I2BF and MA Green, Inc. and,
accordingly, the terms of the Notes supersede all of the Company’s prior
indebtedness to those investors.
All
unpaid principal, together with any then unpaid and accrued interest and other
amounts payable under the Notes, are be due and payable on the earliest to occur
(the “
Maturity Date
”)
of (i) December 31, 2012, (ii) a Change of Controlor (iii) when, upon
or after the occurrence of an Event of Default (as defined in the
Notes).
The Notes
may be prepaid by the Company, but, except with respect to prepayments described
in Section 4 of the Notes, prepayment may be made only with the consent of the
Holder. Any prepayment of amounts outstanding under the Notes shall
be made in connection with a prepayment with respect to all Notes issued
pursuant to the Agreement, allocated
pro rata
among such Notes
based on the principal and interest outstanding with respect
thereto.
Under
Section 4 of the Notes, from and after March 15, 2011, the Company shall direct
a percentage of the Excess Cash Flow from the operation of the Chepen Project to
the prepayment of the Notes in accordance with its terms. Prepayments
of the Notes from Excess Cash Flow shall be made in amounts and upon terms
described in the Agreement.
The Notes
provide for certain Events of Default including a failure to close the Interbank
Facility or failure to secure at least $8,000,000 in new outside financing for
the Chepen Project by the close of business on October 15, 2009, if such failure
shall continue for thirty (30) days after written notice by all holders of Notes
issued under the Agreement.
The Note
provides for various remedies upon the occurrence of an Event of Default,
including acceleration.
The Notes
provide that from and after March 15, 2011, the Company shall direct ninety
percent (90%) of the monthly Excess Cash Flow of the Chepen Operating Company to
the prepayment of the Notes pro rata in accordance with their
terms. Prepayments of the Notes from Excess Cash Flow shall be made
quarterly in arrears no later than ten (10) days after the end of each
quarter.
The
Agreement and the Notes and related documents and agreements are filed as
exhibits to this report and should be referred to in their entirety for a
complete description thereof.
Item
3.02. Unregistered Sales of Equity Securities.
See
disclosure under Items 1.01 and 2.03 of this Report, which is incorporated by
reference in this Item 3.02.
We relied
upon Section 4(2) of the Securities Act of 1933, as amended, for the above
issuances of securities.
We
believed that Section 4(2) of the Securities Act was available
because:
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The
issuance did not involve underwriters, underwriting discounts or
commissions.
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Restrictive
legends were placed on the securities issued as described
above.
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The
issuance did not involve general solicitation or
advertising.
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The
issuance was made solely to Accredited Investors (as defined in Rule
501(a) promulgated under the Securities Act of 1933, as
amended).
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Item
3.03. Material Modification to Rights of Security Holders.
On July
25, 2009, in connection with the Agreement, the Company filed an Amended and
Restated Certificate of Designation, Powers, Preferences and Rights of Series A
Preferred Stock of Stratos Renewables Corporation. The effect of this
Certificate of Amendment was to remove certain protective voting
provisions existing in favor of the Series A Preferred Stockholders which would
give the Series A Preferred Stockholders control over certain strategic
transactions and to lower the price at which antidilution adjustments would
apply to the Series A Preferred Stock so that the Series A antidilution
adjustments become aligned with those provided in the Agreement.
The
Amended and Restated Certificate contains other provisions, is filed as an
exhibit to this report and should be referred to in its entirety for a complete
description thereof.
Item
5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
See
disclosure under Item 3.03 of this Report, which is incorporated by reference in
this Item 5.03.
Item
9.01. Financial Statements and Exhibits.
(d)
Exhibits.
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10.3
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Secured
Note and Common Stock Purchase
Agreement
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10.5
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Certificate
of Amendment of the Certificate of Designation, Powers, Preferences and
Rights of Series A Preferred
Stock
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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STRATOS
RENEWABLES CORPORATION
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Date:
July 19, 2009
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/s/
THOMAS SNYDER
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Thomas
Snyder
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Chief
Executive Officer
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