Item 1.01 Entry into a Material Definitive Agreement.
Promissory Note Financing
The Company
entered into a Note Purchase Agreement, effective as of March 14, 2016 (the Effective Date), by and between the Company and an Investor (the March 15 Investor). The March 15 Investor purchased and the Company issued
and sold a promissory note in the original principal amount of $140,000 (the First Promissory Note). Upon satisfaction of certain conditions set forth in the Note Purchase Agreement, the Company will issue and sell a second promissory
note in the original principal amount of $137,500 (the Second Promissory Note). Each Promissory Note matures six (6) months after the date of Issuance.
The First Promissory Note carries an original issue discount of $12,500 (the First Promissory Note OID). In addition, Company
agreed to pay $5,000 towards the March 15 Investors legal fees incurred in connection with the purchase and sale of the First Promissory Note and the Second Promissory Note, $2,500 of which was paid to the March 15 Investor prior to
the Effective Date and $2,500 of which amount (the Carried Transaction Expense Amount) is included in the initial principal balance of the First Promissory Note. The purchase price of the First Promissory Note was $125,000, computed as
follows: $140,000 initial principal balance, less the First Promissory Note OID, less the Carried Transaction Expense Amount.
The Second
Promissory Note also carries an original issue discount of $12,500 (the Second Promissory Note OID). The purchase price of the Second Promissory Note shall be $125,000, computed as follows: $137,500 initial principal balance, less the
Second Promissory Note OID (the Second Promissory Note Purchase Price).
On March 15, 2016, the Company issued and sold
the First Promissory Note to the March 15 Investor.
Upon satisfaction of the terms (the Mandatory Second Promissory Note
Conditions), the Company shall issue and sell the Second Promissory Note to the March 15 Investor. The Mandatory Second Promissory Note Conditions means that each of the following conditions has been satisfied on or before the date that
is ninety (90) days from the Effective Date: (i) the Share Reserve (as defined in the First Promissory Note) for the First Promissory Note shall have been established; (ii) no Event of Default (as defined in the First Promissory Note)
shall have occurred under the First Promissory Note; (iii) the median daily dollar volume of the Common Stock on its principal market for the nineteen (19) Trading Days (as defined in the First Promissory Note) immediately preceding the
Share Reserve Date is greater than $75,000 per Trading Day; and (iv) the Company has notified Investor in writing that it has elected to require that Investor pay the Second Promissory Note Purchase Price. If the Mandatory Second Promissory
Note Conditions are not satisfied as of the date that is ninety (90) days from the Effective Date, then the March 15 Investor shall not be obligated to pay the Second Promissory Note Purchase Price and the Second Promissory Note shall not
be considered a valid, binding, or enforceable obligation of the Company, and, thereafter, the Second Promissory Note shall only be issued and the Second Promissory Note Purchase Price will only be payable upon the mutual written agreement of
Company and the March 15 Investor.
The First Promissory Note and/or the Second Promissory Note may be prepaid at any time by the
Company in the sole discretion of the Company at a 25% premium to the outstanding balance under the applicable Promissory Note.
In the
event that the First Promissory Note and/or the Second Promissory Note is not paid in full on or before maturity by the Company, then the March 15 Investor shall have the right at any time thereafter until such time as the First Promissory Note
and/or the Second Promissory Note is paid in full, at the March 15 Investors election, to convert (each instance of conversion being a Conversion) all or any part of the outstanding balance into shares (Conversion
Shares) of fully paid and non-assessable Common Stock of the Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted divided by 50% multiplied by the lowest daily volume weighted
average price of the Common Stock in the twenty (20) Trading Days immediately preceding the applicable Conversion.
At any time and from time to time after the March 15 Investor becoming aware of the
occurrence of any event of default, the March 15 Investor may accelerate the First Promissory Note and/or the Second Promissory by written notice to the Company, with the outstanding balance of the respective Note becoming immediately due and
payable in cash at 125% of the outstanding balance.
The foregoing summary description of the Note Purchase Agreement, the First
Promissory Note and the Second Promissory Note does not purport to be complete and is qualified in its entirety by reference to the full text of the documents, or forms thereof, which are filed as Exhibits 10.1, 10.2 and 10.3 to this Current Report
on Form 8-K and are incorporated herein by reference.