Item 1.01 Entry into a Material Definitive Agreement.
As previously
reported in the Current Report on Form 8-K filed on March 26, 2018, by DPW Holdings, Inc. (the “Company”), the
Company entered into a securities purchase agreement dated March 23, 2018, with an institutional investor (the “Investor”)
providing for the issuance of (i) a 12% Note in the principal amount of $1,000,000 at a 10% original issue discount (the “Original
Note”) and (ii) a five-year warrant to purchase up to 15,000 shares of the Company’s common stock, par value $0.001
per share (“Common Stock”) at an exercise price of $23.00, as adjusted to give effect to the Company’s
reverse stock split on March 14, 2019.
On July 3, 2019
(the “Closing Date”), the Company and the Investor entered into an Exchange Agreement (the “Agreement”),
pursuant to which, in exchange for the Original Note, the Company shall issue a Convertible Promissory Note in the principal face
amount of $1,292,000 plus a default premium of $200,000, for an aggregate of $1,492,000, subject to adjustments (the “New
Note”), and (ii) a five-year warrant (the “Warrant”) to purchase of 1,000,000 shares of Common Stock,
subject to adjustments, at an exercise price of $0.22 per share (the “Warrant Shares”), subject to the approval
thereof by the NYSE American.
Description of Convertible Promissory
Note
The New Note is in the aggregate principal
amount of $1,492,000 and bears interest at 12% per annum, which principal and all accrued and unpaid interest are due on January
22, 2020 (the “Maturity Date”), or upon acceleration, prepayment or otherwise in accordance with the terms
of the New Note, and which interest shall be payable in cash, in arrears, on the first business day of each month, with the first
payment of interest due on August 1, 2019. Commencing on July 15, 2019, subject to certain beneficial ownership limitations, the
Investor may convert the principal amount of the New Note and accrued interest earned thereon at any time into shares of the Company’s
common stock (the “Conversion Shares” and with the Warrant Shares, the “Shares”) at $0.22
per share (the “Conversion Price”), subject to adjustment for customary stock splits, stock dividends, combinations
or similar events.
The New Note contains standard and customary
events of default including, but not limited to, failure to make payments when due under the New Note, failure to comply with
certain covenants contained in the New Note, or bankruptcy or insolvency of the Company. Any principal or interest on the New
Note which is not paid when due shall bear interest at the rate of the lesser of (i) eighteen percent (18%) per annum and (ii)
the maximum amount permitted by law from the due date thereof until the same is paid.
So long as no
event of default exists, the Company may prepay, in part or in full, the outstanding principal and accrued and unpaid interest
upon ten (10) days written notice to the Investor (the “Notice”). If the Company exercises its right to prepay
the New Note, the Company shall make payment to the Investor of an amount in cash equal to either of (i) 105% if the Notice is
delivered within three (3) months of the date of issuance or (ii) 110% if the Notice is delivered at any time thereafter, multiplied
by the sum of: (a) the then outstanding principal of the New Note plus any accrued and unpaid interest thereon, and (b) if applicable,
the Default Interest and other amounts due, if any, on the New Note.
During the term
of the New Note, in the event that the Company grants, issues or sells any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of Common
Stock (the “Purchase Rights”), the Investor will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Investor could have acquired if the Investor had held the number of shares of Common
Stock acquirable upon complete conversion of the New Note immediately prior to the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of
Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
On September
19, 2019, the Company and the Investor amended the New Note pursuant to the Amendment which, among other things, provided for
(i) an interest rate of 18% as of August 1, 2019, with all accrued interest due on the Maturity Date; (ii) a Conversion Price
of $4.00 on a post reverse stock split basis, subject to the approval by the NYSE American; and (iii) such additional terms as
more fully set forth in the Amendment.
Description of Warrants
The Warrant entitles the Investor to purchase,
in the aggregate, up to 1,000,000 Warrant Shares at an exercise price of $0.22 per share for a period of five years subject to
certain beneficial ownership limitations. The Warrant is immediately exercisable once the Company obtains approval thereof by the
NYSE American. The exercise price of $0.22 is subject to adjustment for customary stock splits, stock dividends, combinations or
similar events. The Warrant may be exercised for cash or on a cashless basis.
The foregoing descriptions of the Agreement,
the New Note, the Warrant and the Amendment do not purport to be complete and are qualified in their entirety by reference to
their respective forms which are annexed hereto as Exhibits 10.1, 4.1, 4.2 and 4.3, respectively,
to this Current Report on Form 8-K and are incorporated herein by reference. The foregoing does not purport to be a
complete description of the rights and obligations of the parties thereunder and such descriptions are qualified in their entirety
by reference to such exhibits.