Item
1.01.
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Entry
into a Material Definitive Agreement.
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In
the end of October and beginning of November 2016, the Board of Directors (the “Board”) of Vape Holdings, Inc., a
Delaware corporation (the “Company”), closed the transactions described below with Typenex Co-Investment, LLC (“Typenex”)
and GHS Investments, LLC (“GHS”).
Securities
Purchase Agreement with Typenex Co-Investment, LLC
On
November 1, 2016, the Company closed a Securities Purchase Agreement (the “Typenex Agreement”) with Typenex. All capitalized
terms used herein, if not otherwise defined, will be as defined in the Typenex Agreement, attached hereto as Exhibit 10.1.
Pursuant
to the Typenex Agreement, Typenex purchased a Convertible Promissory Note from the Company in the original principal amount of
up to $1,413,000.00 (the “Typenex Note”), at an interest rate of ten percent (10%) per annum. The Typenex Note is
attached hereto as Exhibit 10.2. The Typenex Note is unsecured. The principal of the Typenex Note included an original issue discount
of $128,000 and a transaction fee of $5,000.
The
investment from Typenex is scheduled to occur in a series of sixteen (16) tranches, represented each by a separate Secured Investor
Promissory Note (the “Tranche Notes”) in varying amounts as more particularly described in Exhibit 10.1 hereto. The
first Tranche Note of $40,000 is memorialized in Secured Promissory Note #1 attached hereto as Exhibit 10.3, the funding of which
occurred on or immediately after the execution of the Typenex Agreement. Each Tranche Note will be in a form identical in substance
to Exhibit 10.3, however, each shall be different in amount.
Each
Tranche Note, or any part of it, is convertible into fully paid and non-assessable $0.00001 par value common stock of the Company.
The Conversion Price is as described in the Typenex Agreement and is based on at least a 45% discount to the trading price of
the Company’s common stock.
As
a part of the Typenex Agreement, the Company agreed to use its best efforts to cause its authorized but unissued stock to be increased
in order for the Company to create a reserve sufficient to meet its conversion obligations under the Typenex Note.
There
is no guarantee that Typenex will fund the remainder of the Typenex Note and in fact it is within Typenex’s sole and absolute
discretion whether it ultimately funds Tranche Notes #2- #12. However, in order to secure Typenex’s performance of its obligations
under the Typenex Note, as well as any subsequent Tranche Notes, Typenex agreed to pledge a 40% membership interest in Typenex
Medical, LLC, an Illinois limited liability company. The aforementioned pledge is memorialized in the Membership Pledge Agreement
attached hereto as Exhibit 10.4. Should Typenex decide it won’t fund the remainder of the Tranche Notes, the Company’s
operating results will suffer and its ability to remain a going concern will be jeopardized.
Securities
Purchase Agreement with GHS Investments, LLC
On
October 28, 2016, the Company closed a Securities Purchase Agreement (the “GHS Purchase Agreement”) with GHS. The
GHS Purchase Agreement is attached hereto as Exhibit 10.5 and incorporated herein by this reference.
Pursuant
to the GHS Purchase Agreement, GHS agreed to purchase and the Company agreed to sell up to $1,105,000.00 of convertible securities,
in the form of a Convertible Promissory Note (the “GHS Note”), at an interest rate of ten percent (10%) per annum.
The GHS Note is attached hereto as Exhibit 10.6 and is incorporated herein by this reference. The GHS Note included a ten percent
(10%) original issuance discount (i.e., $100,000.00) and a $5,000 initial transaction fee, as defined in the GHS Purchase Agreement.
Upon the closing of the GHS Purchase Agreement, GHS funded $40,000 to the Company (the “Initial Tranche”). Within
15 days of certain conditions being met, an additional $40,000 shall be disbursed by GHS to the Company, in its sole discretion
(“Second Tranche”). Within 30 days from the Second Tranche’s issuance, so long as there are no defaults under
the GHS Note, GHS in its discretion may fund an additional $50,000 to the Company every 30 days (“Subsequent Tranches”)
until $1,000,000 has been funded to the Company.
The
principal sum and corresponding interest due to GHS shall be prorated based on the consideration actually paid by GHS to the Company
in accordance with the GHS Purchase Agreement.
Each
GHS Note, or any part of it, is convertible into fully paid and non-assessable $0.00001 par value common stock of the Company.
The Conversion Price is as described in the GHS Purchase Agreement and is based on at least a 45% discount to the trading price
of the Company’s common stock.
As
a part of the GHS Purchase Agreement, the Company agreed to use its best efforts to cause its authorized but unissued stock to
be increased in order for the Company to create a reserve sufficient to meet its conversion obligations.
There
is no guarantee that GHS will fund the remainder of the Subsequent Tranches and in fact it is within GHS’s sole and absolute
discretion whether it ultimately funds the Subsequent Tranches. Should GHS decide it won’t fund the Subsequent Tranches,
the Company’s operating results will suffer and its ability to remain a going concern will be jeopardized.
The
foregoing descriptions of the Typenex transaction documents as well as the GHS transaction documents are qualified in their entirety
by reference to the full text of the agreements, copies of which are attached to this Current Report on Form 8-K as Exhibits 10.1
through 10.6 and incorporated by reference into this Item 1.01.