Item
1.01. Entry into a Material Definitive Agreement.
This
Form 8-K/A is filed to correct certain typographical errors contained in the Equity Purchase Agreement (“Purchase Agreement”)
dated September 15, 2017 and effective September 26, 2017 between us and Kodiak Capital Group, LLC (“Kodiak Capital”)
(hereinafter referred to as “Purchaser”), previously filed as an exhibit to our Company’s Current Report on
Form 8-K on October 2, 2017. Under the Purchase Agreement, we may from time to time, in our discretion, sell shares of our common
stock to Purchaser for aggregate gross proceeds of up to $2,000,000. Unless terminated earlier, Purchaser’s purchase commitment
will automatically terminate on the earlier of the date on which such Purchaser shall have purchased our shares pursuant to the
Purchase Agreement for an aggregate purchase price of $2,000,000, or September 15, 2019. We have no obligation to sell any shares
under the Purchase Agreement.
As
provided in the Purchase Agreement, we may require the Purchaser to purchase shares of our common stock from time to time by delivering
a put notice (“Put Notice”) to the Purchaser specifying the total number of shares to be purchased (such number of
shares multiplied by the purchase price described below, the “Investment Amount”); provided there must be a minimum
of ten trading days between delivery of each put notice. We may determine the Investment Amount provided that such amount may
not be lower than $25,000. Our ability to issue Put Notices to Purchaser and require Purchaser to purchase our common stock is
not contingent on the trading volume of our common stock. The Purchaser will have no obligation to purchase shares under the applicable
Purchase Agreement to the extent that such purchase would cause such Purchaser to own more than 9.99% of our common stock (the
“Beneficial Ownership Limitation”).
For
each share of our common stock purchased under the Purchase Agreement, the Purchaser will pay a purchase price equal to 80% of
the Market Price. The Market Price is defined as the VWAP on the principal trading platform for the Common Stock, as reported
by OTC Markets, during the five consecutive Trading Days immediately preceding the date (the “Closing Request Date”)
that Kodiak receives a Put Notice from us (the “Valuation Period”). Purchaser’s obligation to purchase shares
is subject to customary closing conditions, including without limitation a requirement that a registration statement remain effective
registering the resale by Purchaser of the shares to be issued under the Purchase Agreement and the Warrants (the “Registration
Statement”). The Purchase Agreement is not transferable and any benefits attached thereto may not be assigned.
The
Purchase Agreement contains covenants, representations and warranties of our Company and the Purchaser that are typical for transactions
of this type. In addition, we and the Purchaser have granted each other customary indemnification rights in connection with the
applicable Purchase Agreement.
Effective
September 26, 2017 and as a commitment fee under the Purchase Agreement, we issued to Purchaser an unsecured Promissory Note (the
“Commitment Note”), dated September 15, 2017, for the principal amount of $100,000 with interest at the rate of 5%
per annum, payable nine months from the issue date. In the event the Registration Statement is not effective by December 31, 2017,
through no fault of ours, the Commitment Note shall be deemed cancelled, null and void, and of no further force and effect. We
also issued to Purchaser an additional unsecured Promissory Note (the “First Note”), dated September 15, 2017 and
effective September 26, 2017, for the principal amount of $110,000 with interest at the rate of 5% per annum, payable six months
from the issue date. Upon the filing of the Registration Statement, we will issue to Purchaser an additional note (the “Second
Note” and together with the Commitment Note and the First Note, the “Notes”) for the principal amount of $110,000
with interest at the rate of 5% per annum, payable six months from the issue date. The principal amount and accrued interest under
the Notes are not convertible except in the event of default. In the event of default, the conversion price for the Notes shall
be the lesser of $0.25 per share or 70% of the lowest trading price during the ten-trading-day period prior to the conversion
date. Conversion of the Notes is subject to the Beneficial Ownership Limitation.
Effective
September 26, 2017 and as an additional commitment fee under the Purchase Agreement, we issued to Purchaser a Common Stock Purchase
Warrant (“First Warrant”), dated September 15, 2017, to purchase up to 1,000,000 shares of the Company’s Common
Stock at an initial exercise price of $0.15 per share. We and the Purchaser have also contemplated the issuance by us to the Purchaser
of two additional Common Stock Purchase Warrants (the “Second Warrant” and the “Third Warrant” and, together
with the First Warrant, the “Warrants”). The Second Warrant, to be issued only upon the filing of the Registration
Statement, entitles Purchaser to purchase up to 1,000,000 shares of the Company’s common stock at an initial exercise price
of $0.20 per share. The Second Warrant was issued by us to Purchaser on October 13, 2017 in connection with our filing of the
Registration Staement contemplated by the Purchase Agreement. The Third Warrant, to be issued only upon the first Closing Date,
entitles Purchaser to purchase up to 4,000,000 shares of the Company’s common stock at an initial exercise price of $0.25
per share. The exercise price and number of warrant shares under each of the Warrants are subject to adjustments provided for
in each such Warrant and are subject to the Beneficial Ownership Limitation.
In
connection with the Purchase Agreement, we also entered into a Registration Rights Agreement with Purchaser requiring us to prepare
and file, within 30 days, the Registration Statement registering the resale by Purchaser of shares to be issued under the Purchase
Agreement and the Warrants, to use commercially reasonable efforts to cause such registration statement to become effective, and
to keep such Registration Statement effective until (i) the date when Purchaser may sell all the shares under Rule 144 without
volume limitations, or (ii) the date Purchaser no longer owns any of the shares.
The
foregoing description of the terms of the Purchase Agreement, the Notes, the Warrants and the Registration Rights Agreement does
not purport to be complete and is subject to and qualified in its entirety by reference to the agreements/instructions themselves,
copies of which are filed with this report, and the terms of which are incorporated herein by reference. The benefits and representations
and warranties set forth in such documents (if any) are not intended to and do not constitute continuing representations and warranties
of the Company or any other party to persons not a party thereto.