Item
1.01 Entry into a Material Definitive Agreement.
Securities
Purchase Agreement
On
August 19, 2019 (the “Effective Date”), the Company and FirstFire Global Opportunities Fund, LLC (the “Lender”)
entered into a Securities Purchase Agreement (the “SPA”) by which the Lender provided a sum of $50,000 (the “Consideration”)
to the Company, in return for a senior convertible promissory note (the “Note”) with a face amount of $55,000 (which
difference in value as compared to the Consideration is due to an original issue discount of $5,000), a common stock purchase
warrant (the “Warrant”), the Confession of Judgment (as defined below) and 7,500 shares of the Company’s common
stock, among other agreements and obligations. The net proceeds of the Consideration, which were received by the Company on August
22, 2019, equal $47,500 after payment of $2,500 in Lender’s legal fees, and will be used for general corporate purposes.
Under
the terms of the SPA and the Note, the Lender must pay the Consideration at closing. The Note obligates the Company to pay by
May 19, 2020 (the “Maturity Date”) a principal amount of $55,000 together with interest at a rate equal to 10% per
annum, which principal exceeds the Consideration by the amount of an original issue discount. Any amount of principal or interest
that is not paid by the Maturity Date bears interest at the rate of the lesser of 15% and the maximum amount permitted by law,
from the Maturity Date to the date such amount is paid.
The
Lender has the right, at any time, to convert any outstanding and unpaid amount of the Note into shares of the Company’s
common stock or securities convertible into the Company’s common stock, provided that such conversion would not result in
the Lender beneficially owning more than 4.99% of the Company’s common stock. Subject to certain limitations and adjustments
as described in the Note, the Lender may convert at a per share conversion price equal to $0.50 (the “Fixed Conversion Price”),
provided that at any time on or after the date which is six months after the Effective Date, the conversion price will equal the
lower of (i) the Fixed Conversion Price or (ii) 60% multiplied by the lowest closing bid price of the common stock of the Company
during the twenty consecutive Trading Day (as defined in the Note) period immediately preceding the date of such conversion. Upon
such conversion, all rights with respect to the portion of the Note being so converted terminate, except for the right to receive
the Company’s common stock or other securities, cash or other assets as provided in the Note due upon such conversion.
The
Company may prepay the outstanding principal amount under the Note during the initial 90 calendar day period after the Effective
Date, by making a payment to the Lender of an amount in cash equal to 115% multiplied by the outstanding principal amount, plus
accrued and unpaid interest and any default interest on those amounts, subject to the Company providing prior written notice to
the Lender. The Company may prepay the outstanding principal amount under the Note during the period from the 91st through the
120th calendar day following the Effective Date, by making a payment to the Lender of an amount in cash equal to 125% multiplied
by the outstanding principal amount, plus accrued and unpaid interest and any default interest on those amounts, subject to the
Company providing prior written notice to the Lender. The Company may prepay the outstanding principal amount under the Note during
the period from the 121st through the 180th calendar day following the Effective Date, by making a payment to the Lender of an
amount in cash equal to 130% multiplied by the outstanding principal amount, plus accrued and unpaid interest and any default
interest on those amounts, subject to the Company providing prior written notice to the Lender. The Company may not prepay any
amount outstanding under the Note after the earlier of the first Conversion Date (as defined in the Note) and the 180th calendar
day following the Effective Date.
The
SPA includes anti-dilution pricing adjustments in connection with certain dilutive issuances of its equity securities and securities
convertible into its equity. Additionally, under the SPA, the Company may not enter into an offering of its securities with terms
that would benefit an investor more than the Lender is benefited under the SPA and the agreements ancillary thereto, unless the
Company offers the Lender those same terms. The SPA also grants the Lender certain registration rights.
The
Warrant is a common stock purchase warrant to purchase 150,000 shares of the Company’s common stock, for value received
in connection with the issuance of the Note, from the date of issuance of the Warrant until the five-year anniversary thereof,
at an exercise price of $0.50 (subject to adjustment as provided therein) per share of common stock.
Additionally,
the Company provided a confession of judgment (the “Confession of Judgment”) in favor of the Lender for the amount
of the Note plus fees and costs, to be filed pursuant to the terms and conditions of the SPA and the Note.
The
Note and the shares of the Company’s common stock issuable upon conversion thereof are offered and sold to the Lender in
reliance upon specific exemptions from the registration requirements of United States federal and state securities laws, which
include Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506(b) promulgated by
the SEC under the 1933 Act. Pursuant to these exemptions, the Lender represented to the Company under the SPA, among other representations,
that it was an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the 1933 Act.
The
descriptions of the SPA, the Note, the Warrant and the additional associated documents do not purport to be complete. The descriptions
of the SPA, the Note, and the Warrant are qualified in their entirety by reference to the SPA, the Note, and the Warrant, which
are included as Exhibit 99.1, Exhibit 99.2, and Exhibit 99.3, respectively, to this Current Report on Form 8-K and are incorporated
herein by reference.
Settlement
Agreement
On
August 21, 2019, the Company and Salamandra, LLC (“Salamandra”) entered into a settlement agreement and release (the
“Settlement Agreement”) regarding $202,395 in amounts owed by the Company to Salamandra (as reduced by any further
payments by the Company to Salamandra, the “Full Amount”) in connection with an arbitration award previously granted
in favor of Salamandra in the Superior Court of New Jersey.
Under
the terms of the Settlement Agreement, if the Company pays to Salamandra $125,000 before November 30, 2019 (the “Threshold
Date”), which amount the Company must pay to Salamandra if the Company raises $600,000 in working capital before the Threshold
Date, such payment will constitute satisfaction of the Full Amount owed and will serve as consideration for the dismissal of the
action underlying the arbitration award and the mutual releases set forth in the Settlement Agreement. If the Company raises less
than $600,000 in working capital before the Threshold Date, the Company may pay to Salamandra an amount equal to 21% of the working
capital amount raised, in which case such payment will reduce the Full Amount owed on a dollar-for-dollar basis.
The
description of the Settlement Agreement does not purport to be complete and is qualified in its entirety by reference to the Settlement
Agreement, which is included as Exhibit 99.4 to this Current Report on Form 8-K and is incorporated herein by reference.