Item
1.01 Entry into a Material Definitive Agreement
Financing
of up to $3,000,000
From
March 2016 to the date of this report, Quantum Materials Corp. (the “
Company
”) conducted a private offering,
up to $3,000,000, consisting of 8% unsecured convertible promissory notes (the “
Company Notes
”) which may be
voluntarily converted into shares of the Company’s common stock and five-year warrants (the “
Company Warrants
”)
to purchase shares of the Company’s common stock. The securities are sold as units (“
Units
”), with each
Unit consisting of a Company Note, in the principal amount of $1,000 and Company Warrants to purchase 4,166 shares of the Company’s
common stock, pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “
Securities Act
”),
and Rule 506 of Regulation D (“
Regulation D
”) promulgated thereunder.
On
November 7, 2016, the Company entered into a Securities Purchase Agreement dated as of the same date, with a private
investor (the “
Investor
”) for 200 Units (the “
Securities Purchase Agreement
”). The
transaction closed on November 7, 2016. Each of the other accredited investors entered into a subscription agreement,
pursuant to which such accredited investor agreed to purchase a certain number of Units upon acceptance by the Company (the
“
Subscription Agreement
”). As of the date of this report, the Company has raised $1,965,000 in the
offering through the issuance to accredited investors, including Investor, of the Company Notes totaling $1,965,000 of
principal and the Company Warrants to purchase an aggregate of 8,186,190 shares of the Company’s common
stock.
The
Company Notes are due in two years and include interest at the rate of 8% per annum, due annually. The Company may prepay the
Company Notes, in whole or in part, at any time upon notice, without penalty. The initial interest payment is due twelve months
from the date of issuance of the Company Notes in cash or common stock (at the discretion of the Company) at $0.12 per share.
The Company Notes provide for customary events of default such as failing to timely make payments under the Company Notes when
due and the occurrence of certain fundamental defaults, as described in the Company Notes. In the event of default, interest shall
accrue on the outstanding principal balance of the Company Notes at the lesser of (a) 10% per annum or (b) the highest rate permissible
by law. The holders of the Company Notes may convert the Company Notes into shares of common stock, at any time and from time
to time prior to the maturity date, at a price of $0.12 per share, subject to certain adjustments (the “
Conversion Price
”).
The Company Notes will automatically convert into shares of common stock in the event (i) the Company’s common stock trades
at or above 2.0 times the then applicable Conversion Price for a period of 30 consecutive trading days with minimum average trading
volume of 250,000 shares per day over such period and (ii) the shares of common stock issuable upon conversion are freely-tradable
by the holder thereof. Furthermore, in the event of a financing by the Company in an amount equal to or greater than $10,000,000,
the Company Note shall be automatically converted into, at the discretion of the holder, either (i) shares of common stock (at
the conversion price) or (ii) the next round of financing at a 20% discount to the next round of financing. The holder of the
Company Note may covert the Company Note into shares of common stock at any time prior to the maturity date, at the Conversion
Price.
The
Company Warrant has an exercise price of $0.15. The Company Warrant shall be exercisable after the date of issuance and shall
expire five years after the date of issuance, unless otherwise extended by the Company. The Company Warrant issued to the Investor
includes cashless exercise rights.
Under
the terms of the Company Note and Company Warrant issued to the Investor, at no time may the Company Note or Company Warrant issued
to the Investor be converted into or exercised for shares of our common stock if such conversion or exercise would result in the
Investor and its affiliates owning an aggregate of shares of our common stock in excess of 4.99% of the then outstanding shares
of our common stock, provided such percentage may increase to 9.99% upon not less than 61 days prior written notice by the Investor.
The
foregoing description of the Subscription Agreement, Company Note, Company Warrant, Securities Purchase Agreement, Company Note
issued to Investor and Company Warrant issued to Investor are qualified in their entirety by the full text of the forms of Securities
Purchase Agreement, Company Note and Company Warrant, a copy of each which is attached hereto as
Exhibits 10.1,
10.2,
10.3
,
10.4
,
10.5
, and
10.6
respectively, and each of which is incorporated herein in its entirety by
reference.