Item
1.01
|
Entry
into a Material Definitive Agreement
|
On
August 31, 2017, Rennova Health, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase
Agreement”) as a private placement with certain existing institutional investors of the Company. Pursuant to the
Purchase Agreement, the Company has agreed to issue $2,604,000 aggregate principal amount of Senior Secured Original Issue
Discount Convertible Debentures due two years from the date of issuance (the “New Debentures”) and three series of
warrants to purchase shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), as
further described below (each, a “Warrant” and, collectively, the “Warrants”). The Purchase Agreement
contains certain customary representations, warranties and covenants. Gross proceeds from the Purchase Agreement are expected
to be $2,100,000. The closing of the offering is expected to occur on or before September 15, 2017 and is subject
to, among other things, receving certain consents and other customary closing conditions.
Simultaneously
with the offering of New Debentures and Warrants, pursuant to Exchange Agreements, the holders of the Company’s
Original Issue Discount Debentures issued on July 17, 2017 and due October 17, 2017 will exchange $4,136,862
principal amount of such debentures for $6,412,136 of new debentures on the same terms as, and pari passu with, the
New Debentures (the “Exchange Debentures” and, together with the New Debentures, the “Debentures”) and
Warrants. All issuance amounts of Debentures reflect a 24% original issue discount.
The
Debentures may be converted at any time at a conversion price equal to $0.26. The Debentures will begin to amortize
monthly commencing on the earlier of the 90
th
day following the closing date or the effective date of a
registration statement covering the shares of common stock issuable upon conversion of the Debentures. On each monthly
amortization date, the Company may elect to repay 5% of the original principal amount of Debentures in cash or, in lieu
thereof, the conversion price of such Debentures shall thereafter be 85% of the volume weighted average price at the time of
conversion. In the event the Company does not elect to pay such amortization amounts in cash, each investor, in their sole
discretion, may increase the conversion amount subject to the alternative conversion price by up to four times
the amortization amount.
If
any Event of Default (as defined in the Debentures) occurs, the outstanding principal amount of the Debentures, plus accrued but
unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become,
at the holder’s election, immediately due and payable in cash. Commencing five days after the occurrence of any Event of
Default that results in the eventual acceleration of the Debentures, the interest rate on the Debentures shall accrue at an interest
rate equal to the lesser of 18% per annum and the maximum rate permitted under applicable law.
The
Debentures contain customary affirmative and negative covenants. The conversion price is subject to “full ratchet”
and other customary anti-dilution protections as more fully described in the Debentures.
The
Series A Warrants will be exercisable for up to a number of shares of Common Stock equal to 100% of the shares underlying the
Debentures. They will be immediately exercisable and have a term of exercise equal to five years. The Series B Warrants will be
exercisable for up to a number of shares of Common Stock equal to 100% of the shares underlying the Debentures and are exercisable
for a period of 18 months commencing immediately. The Series C Warrants will be exercisable for up to a number of shares of Common
Stock equal to 100% of the shares underlying the Debentures and have a term of five years provided such Warrants shall only vest
if, when and to the extent that the holders exercise the Series B Warrants. The Warrants each will have an exercise price of $0.26.
All Warrants will be subject to “full ratchet” and other customary anti-dilution protections.
As
collateral security for all of the Company’s obligations under the Debentures, the Company and substantially all
of the Company’s subsidiaries will grant the Debenture holders a security interest in all of the Company’s
and such subsidiaries’ assets. To further secure the Company’s obligations, such subsidiaries will
also execute a Guarantee, pursuant to which the subsidiaries agree to guaranty the Company’s obligations owed to the
Debenture holders.
The
securities to be issued under the Purchase Agreement will be issued in reliance on the exemption from registration contained in
Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Rule 506 of Regulation D
promulgated thereunder as transactions by an issuer not involving any public offering. The securities to be issued under the Exchange
Agreements will be issued in reliance on the exemption from registration contained in Section 3(a)(9) of the Securities
Act. This Current Report on Form 8-K (this “Current Report”) does not constitute an offer to sell or the solicitation
of an offer to buy any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
The
Company will be obligated to file a registration statement registering for resale the shares underlying the Debentures and Warrants
on or before 20 days after the closing and use best efforts to cause such registration statement to be declared effective
within 45 days or 75 days if reviewed. The Company’s failure to satisfy certain conditions and deadlines described in the
Registration Rights Agreement may subject it to payment of certain liquidated damages. Additionally, the Company is required to
seek shareholder approval to issue in excess of 20% of the Company’s issued and outstanding shares of Common Stock. The
holders were also granted a right of participation in up to 50% of any future offerings for so long as the Debentures and Warrants
are outstanding.
The
Purchase Agreement may be terminated by any purchaser, as to such purchaser’s obligations only, if the closing of the Purchase
Agreement has not been consummated by September 15, 2017; provided, however, that such termination will not affect the
right of any party to sue for breach by any other party (or parties).
The
foregoing description of the Purchase Agreement, the Debentures, the Warrants, and the Exchange Agreements does
not purport to be complete and is qualified in its entirety by reference to the full text of such agreements, which are filed
as exhibits to this Current Report and are incorporated herein by reference.