Item 1.01 Entry into a Material Definitive Agreement.
On
October 28, 2016, Orbital Tracking Corp. (the “
Company
”) entered into
separate subscription agreements (the “
Subscription Agreement
”)
with accredited investors relating to the issuance and sale of
$350,000, out of a maximum of $800,000, of shares of Series H
convertible preferred stock (the “
Series H Preferred
Stock
”) at a purchase price of $4.00 per share (the
“
Series H
Offering
”).
The
terms of the Series H Preferred Stock are set forth in the
Certificate of Designation of Series H Convertible Preferred Stock
(the “
Series H
COD
”) filed with the Secretary of State of the State
of Nevada. The Series H Preferred Stock are convertible into shares
of common stock based on a conversion calculation equal to the
stated value of such Series H Preferred Stock divided by the
conversion price. The stated value of each Series H Preferred Stock
is $4.00 and the initial conversion price is $0.04 per share,
subject to adjustment as set forth in the Series H COD. The Company
is prohibited from effecting a conversion of the Series H Preferred
Stock to the extent that, as a result of such conversion, the
investor would beneficially own more than 4.99% of the number of
shares of the Company’s common stock outstanding immediately
after giving effect to the issuance of shares of common stock upon
conversion of the Series H Preferred Stock.
Each
Series H Preferred Stock
entitles the holder to cast
one vote per share of
Series H Preferred Stock
owned as of the record date for the
determination of shareholders entitled to vote, subject to the
4.99% beneficial ownership limitation.
The
Subscription Agreement also contains other customary
representations, warranties and agreements by the Company and the
investors.
In
order to conduct the Series H Offering, the Company has solicited
the consent of certain shareholders, as required under the
agreements entered into by the Company during prior offerings,
whereby such shareholders were granted certain notification,
consent and anti-dilution rights (“
Prior Offerings
”).
Certain shareholders have waived their right to adjustment, equal
treatment, most favored nations and other rights to which they were
entitled pursuant to the Prior Offerings, including without
limitation, certain rights granted to holders of our Series C
Preferred Stock, Series F Preferred Stock and G Preferred Stock.
However, the Company is required to issue to certain prior
investors an aggregate of 550,000 shares of Series C Preferred
Stock, which is convertible into an aggregate of 5,500,000 shares
of the Company’s common stock.
Further, in order
to proceed with the Series H Offering, the Company has agreed to
issue additional shares of Series F Preferred Stock and Series G
Preferred Stock to certain prior investors. However, in lieu of
issuing such additional shares of Series F Preferred Stock and
Series G Preferred Stock, the Company has agreed, pursuant to that
certain Series I Issuance Agreement, to create a new series of
preferred stock, to be designated as “Series I Preferred
Stock” and will issue to such holders of Series F Preferred
Stock and Series G Preferred Stock an aggregate of 114,944 shares
of Series I Preferred Stock, each of which shall be convertible
into one hundred (100) shares of the Company’s common stock.
The terms of the Series I Preferred Stock are set forth in the
Certificate of Designation of Series I Convertible Preferred Stock
(the “
Series I
COD
”) filed with the Secretary of State of the State
of Nevada.
The
foregoing descriptions of the Subscription Agreement, the Series H
Preferred Stock, the Series I Preferred Stock and the Series I
Issuance Agreement are not complete and are qualified in their
entireties by reference to the full text of the form of
Subscription Agreement, the Series H COD, the Series I COD and the
Series I Issuance Agreement, copies of which are filed as Exhibit
10.1, Exhibit 10.2, Exhibit 10.3 and Exhibit 10.4, respectively, to
this report and are incorporated by reference herein.