Item 1.01.
|
Entry into a Material Definitive Agreement.
|
On May 23, 2016, Notis Global, Inc.
(the Company) entered into a Securities Purchase Agreement dated May 20, 2016 (the
SPA
) with an investor (the
Investor
) pursuant to which it issued to the May 23 Investor a Convertible
Promissory Note (the
Note
) in the principal amount of $1,242,500 that matures on July 20, 2017 and earns interest at the rate of 10% per annum. The Note carries an original issuance discount of $112,500 and the Company
agreed to pay $5,000 in legal fees for the Investor. In exchange for the Note, the Investor (1) paid to the Company $125,000 less $6,250 in broker fees paid by the Company, and (2) issued to the Company eight (8) secured promissory
notes in the principal amount of $125,000 each (each, a
Investor Note
and collectively the
Investor Notes
). The Investor Notes are secured by 60% of the Investors membership interest in Typenex Medical,
LLC, an Illinois limited liability company (the
Collateral
).
The Investors right to convert any portion of the
Note is conditioned upon the Investors payment in full of the secured Investor Note.
The Company must begin repaying principal and
interest on funded portions of the Note beginning 180 days after the date of the Note, and each month thereafter for a total period of 10 months, in fixed amounts of $124,250.00 per month. The Company has a right to prepay the total outstanding
balance of the Note at any time (so long as it is not in default under the Note) in cash equal to 125% of the outstanding balance of the Note. Furthermore, for a period of sixty days from the date of entry into the Note, a third party has the right
to prepay the outstanding balance of the Note in cash equal to 130% of the outstanding balance of the Note.
The conversion price for
conversion of the Note or portions of the Note into shares of Company common Stock shall be 50% of the lowest closing bid price during the twenty trading days immediately preceding the conversion.
In connection with any Event of Default by the Company, the Investor may accelerate the Note with the outstanding balance becoming immediately
due and payable in cash at 125% of the outstanding balance. Furthermore, the Investor may elect to increase the outstanding balance by applying a 125% default effect (up to two applications for two defaults) without accelerating the
outstanding balance, in which event the outstanding balance shall be increased as of the date of the occurrence of the applicable event of default. Furthermore, following the occurrence of an event of default interest shall accrue on the outstanding
balance beginning on the date the applicable event of default occurring at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law.
Outstanding Balance
as such term is defined
in the Note, means, the full $1,242,500 as reduced or increased, as the case may be, pursuant to the terms of the Note for payment, Conversion, offset, or otherwise, plus accrued but unpaid interest, collection and enforcements costs (including
attorneys fees) incurred by Investor, transfer, stamp, issuance and similar taxes and fees related to Conversions, and any other fees or charges (including without limitation conversion delay late fees) incurred under the Note.
Notwithstanding any other provisions of the Note or any other of the related transaction documents, the Investor maintains a right of offset
pursuant to the terms of the secured Investor Notes that, under certain circumstances, permits Investor to deduct amounts owed by the Company under the Note from amounts otherwise owed by Investor under the secured Investor Notes (the
Lender Offset Right
), and, furthermore, at any time the Company shall be entitled to deduct and offset any amount owing by the Investor under the secured Investor Notes from any amount owed by the Company under the Note (the
Borrower Offset Right
). The Company does not incur any prepayment premium with respect to any portions of the Note that are satisfied by way of a Borrower Offset Right or Lender Offset Right.
In connection with entry into the SPA, the Company agreed to reserve 300% of the shares into which the Note can be converted for the Investor.
The Company and the Investor also entered into a Membership Interest Pledge Agreement to secure the Collateral, and other ancillary
documentation in connection with the closing of the transaction on May 23. The pledge is not assignable and the Investor can, in its sole discretion, cancel the pledge at any time.
The Investor Notes also mature on July 20, 2017 and accrue interest on the unpaid principal
balance and at a rate of 10% per annum. The Investor may elect, in its sole discretion, to extend the Investor Note maturity date for up to thirty days. Unless prepaid, all principal and accrued interest under the Investor Notes is payable in
one lump sum on the Investor Notes maturity date.
The Investor may, with the Companys consent, prepay, without penalty, all
or any portion of the outstanding balance of the Investor Notes at any time prior to the Investor Note Maturity Date. Notwithstanding the foregoing, beginning on the date that is 90 days from the date of the issuance of the Note, and then on the
6-month anniversary of the date of entry into the Note and monthly thereafter for a total of eight payments, the Investor shall be obligated to prepay one of the eight Investor Notes at each such occurrence, if at the time of such occurrence:
(a) no event of default under the Note has occurred; (b) the average daily dollar volume of the Common Stock on its principal market for the twenty (20) trading days is greater than $55,000.00; (c) the market capitalization of
the Common Stock on the date of the occurrence is greater than $3,000,000.00; and (d) the share reserve described below remains in place at the required thresholds.
The Company also made extensive representations and warranties relating to the transaction.
The foregoing descriptions of the SPA, the Note, the Investor Notes, and the Membership Interest Pledge Agreement are not complete and are
qualified in their entirety by reference to the full text of the documents, which the Company intends to file as Exhibits to the Quarterly Report on Form 10-Q for the fiscal quarter ending June 30, 2016.