Item
1.01 Entry into a Material Definitive Agreement
Silo
Equity Partners Venture Fund LLC Convertible Note
Effective
on March 30, 2017, the Company closed the issuance of a convertible note, in the principal amount of $100,000, bearing interest
at the rate of 8% per annum (the “Convertible Note”) to Silo Equity Partners Venture Fund LLC (the “Holder”),
pursuant to a Securities Purchase Agreement dated March 22, 2017. The Convertible Note provides the Holder the right, at any time
after 180 days from the Issue Date of this Note, to convert the outstanding balance (including accrued and unpaid interest) of
the Convertible Note into shares of the Company’s common stock at a price ("Conversion Price") for each share
of common stock equal to the lower of: (i) the closing sale price of the Common Stock on the Principal Market on the Trading Day
immediately preceding the Closing Date, and (ii) 50% of the lowest sale price for the Common Stock on the Principal Market during
the fifteen (15) consecutive Trading Days immediately preceding the Conversion Date;
provided, however
, if the Company’s
share price at any time loses the bid, then the Conversion Price may, in the Holder’s sole and absolute discretion, be reduced
to a fixed conversion price of 0.00001 (if lower than the conversion price otherwise);
and provided,
that if on the date
of delivery of the Conversion Shares to the Holder, or any date thereafter while Conversion Shares are held by the Holder, the
closing bid price per share of Common Stock on the Principal Market on the Trading Day on which the Common Shares are traded is
less than the sale price per share of Common Stock on the Principal Market on the Trading Day used to calculate the Conversion
Price hereunder, then such Conversion Price shall be automatically reduced such that the Conversion Price shall be recalculated
using the new low closing bid price (“Adjusted Conversion Price”) and shall replace the Conversion Price above, and
Holder shall be issued a number of additional shares such that the aggregate number of shares Holder receives is based upon the
Adjusted Conversion Price. The Convertible Note is payable, along with interest thereon, on September 22, 2017.
In
the event any principal or interest is not timely paid or another Event of Default, the Convertible Note is immediately due and
payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), and interest
shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at
the highest rate of interest permitted by law. The Holder is prohibited from converting the Convertible Note into shares of the
Company’s common stock to the extent that such conversion would result in the Holder beneficially owning more than 9.99%
of the Company’s common stock.
During
the first six months in which the Convertible Note is outstanding, the Company may redeem the Convertible Note as follows: (i)
if the redemption is within the first 60 days, then for an amount equal to 130% of the unpaid principal amount of the Convertible
Note along with any interest that has accrued during that period, and (ii) after the 60
th
day, but prior to the 120
th
,
then for an amount equal to 120% of the unpaid principal amount of the Convertible Note along with any accrued interest. After
120 days have elapsed from the issuance date the Company an amount equal to 125% of the unpaid principal amount of the Convertible
Note along with any interest.
The
Convertible Note provides for customary events of default such as failing to timely make payments under the Convertible Note when
due, unsatisfied judgments against the Company, failure to issue conversion shares in a timely manner and failure of the Company
to file annual and quarterly reports with the Securities and Exchange Commission. Upon the occurrence of an event of default,
as described in the Convertible Note, the Holder is entitled to enforce any and all of its rights and remedies provided in the
Convertible Note or any other rights or remedies afforded by law to collect the default amount, calculated as 150% (or 200% if
the default relates to delivery of conversion shares) of the Default Amount as defined, or if the Default Amount is not paid within
five business days, to require the Company to immediately issue, in lieu of the Default Amount, the number of shares of Common
Stock of the Company equal to the Default Amount divided by the Conversion Price then in effect.
The
foregoing descriptions of the SECURITY PURCHASE AGREEMENT AND Convertible Note do not purport to be complete and are qualified
in their entirety by reference to the FORMS OF SECURITY PURCHASE AGREEMENT AND Convertible Note, which are filed as Exhibits 10.44
and 10.45 to this Current Report on Form 8-K and are incorporated herein by reference. DEFINED TERMS USED IN THE DESCRIPTIONS
IN THIS CURRENT REPORT SHALL HAVE THE RESPECTIVE MEANINGS PROVIDED IN THE SECURITIES PURCHSE AGREEMENT AND CONVERTIBLE NOTE, UNLESS
SPECIFICALLY DEFINED ABOVE IN THIS REPORT.