ITEM 1.01 - ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On December 6, 2019, we entered into a Securities Purchase Agreement (“SPA”) with Labrys Fund, LP, a Delaware limited partnership (“Purchaser”), pursuant to which we issued and sold to the Purchaser a convertible promissory note, executed on December 6, 2019 in the principal amount of $235,000 (the “Note”). We received $211,500 from the investment less the original issue discount.
The maturity date for the Note is June 3, 2020 and the Note bears interest at the rate of 12% per annum. All principal and accrued interest on the Note is convertible into shares of our common stock at the election of the Purchaser at any time at a conversion price equal to the lesser of (i) 50% of the lowest trading price during the previous 30 days and ending on the latest trading date prior to the date of the Note, or (ii) a 50% of the lowest trading price for our common stock during the 30 trading day period immediately prior to conversion.
We have the right to prepay the Note at any time prior to 180 days following the closing date, which prepayment must include all outstanding principal, accrued and unpaid interest and other amounts as indicated in the Note.
The Note contains customary default events which, if triggered and not timely cured, will result in default interest and penalties.
The foregoing description of the SPA and the Note, and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the SPA and the Note, which are included in this Current Report as Exhibits 10.1 and 4.1, respectively, and are incorporated herein by reference.
If the Note is converted prior to us paying off such notes under the prepayment provisions, it would lead to substantial dilution to our shareholders as a result of the conversion discounted for the Note. There can be no assurance that there will be any funds available to pay of the Note, or if available, on terms that will be acceptable to us or our shareholders. If we fails to obtain such additional financing on a timely basis, Purchaser may convert the Note and sell the underlying shares, which may result in significant dilution to shareholders due to the conversion discount, as well as a significant decrease in our stock price.