CTBO Cantabio Pharmaceuticals Inc (CE)

On January 25, 2017, we entered into a securities purchase agreement with an accredited investor to place Convertible Debentures (the “ Debentures ”) with a maturity date of one year after the issuance thereof in the aggregate principal amount of up to $600,000 (the “ Transaction ”), provided that in case of an event of default, the Debentures may become at the holder’s election immediately due and payable. The initial closing of the Transaction occurred on January 25, 2017 when we issued a Debenture for $300,000.  A second closing for $150,000 is scheduled for within three days of the date on which we file a registration statement for the registration of the shares underlying the Convertible Debentures with the U.S. Securities and Exchange Commission (the “Conversion Shares”) and a third closing for $150,000 is scheduled for within 3 days of the date on which the U.S. Securities and Exchange Commission declares the registration statement effective. The Debentures bear interest at the rate of 5% per annum.  In addition, we must pay to the holder a fee equal to 7% of the amount of the Debentures to assist in their monitoring costs for the Debentures. The net proceeds of the financing will be used for general corporate matters and for other expenses.

 

The Debenture may be converted at any time on or prior to maturity at the lower of $0.3107 or 93% of the average of the three lowest daily VWAPs during the 10 consecutive trading days immediately preceding the conversion date, provided that as long as we are not in default under the Debenture, the conversion price may never be less than $0.10.  We may not convert any portion of a Debenture if such conversion would result in the holder beneficially owning more than 4.99% of our then issued and common stock, provided that such limitation may be waived by the holder with 65 days’ notice.

Any time after the six-month anniversary of the issuance of a Debenture that the daily VWAP is less than $0.10 for a period of twenty consecutive trading days (the “Triggering Date”) and only for so long as such conditions exist after a Triggering Date, we shall make monthly payments beginning on the last calendar day of the month when the Triggering Date occurred.  Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the Triggering Date divided by the number of such monthly payments until maturity, (ii) a redemption premium of 20% in respect of such principal amount and (iii) accrued and unpaid interest hereunder as of each payment date.  We may, no more than twice, obtain a thirty day deferral of a monthly payment due as a result of a Triggering Date through the payment of a deferral fee in the amount equal to 10% of the total amount of such monthly payment.  Each deferral payment may be paid by the issuance of such number of shares as is equal to the applicable deferral payment divided by a price per share equal to 93% of the average of the four lowest daily VWAPs during the 10 consecutive Trading Days immediately preceding the due date in respect of such monthly payment begin deferred, provided that such shares issued will be immediately freely tradable shares in the hands of the holder

We also executed a Registration Rights Agreement pursuant to which we are required to file a registration statement (the “Registration Statement”) for the resale of the shares of common stock into which the Debentures may be converted within 30 days of the initial closing. We are required to use our best efforts to cause such registration statement to be declared effective within 90 days of the initial closing.

We also entered into a Security Agreement to secure payment and performance of our obligations under the Debentures and related agreements pursuant to which we granted the investor a security interest in all of our assets.  The security interest granted pursuant to the Security Agreement terminates on (i) the effectiveness of the Registration Statement if our common stock’s closing price is greater than $0.10 for the twenty consecutive trading days prior to effectiveness or (ii) any time after the effectiveness of the Registration Statement that our common stock’s closing price is greater than $0.10 for the twenty consecutive trading days.