Item
1.01. Entry into a Material Definitive Agreement.
Restructuring,
Settlement and Mutual General Release Agreement
On March 31, 2020, Ngen Technologies Holdings
Corp. (the “Company”) entered into that certain Restructuring, Settlement and Mutual General Release Agreement (the
“Restructuring Agreement”) by and between the Company, Ngen Technologies USA Corp., a wholly owned subsidiary
of the Company (“Ngen Texas”), Broken Circuit Technologies, Inc. (“Broken Circuit”), Carebourn Capital,
LP (“CareBourn LP”), CareBourn, LLC (“CareBourn LLC”), More Capital LLC (“More Capital”),
Auctus Fund, LLC (“Auctus”), and Santa Monica Venture Finance, Inc. (“Santa Monica”). Broken Circuit
is 49.5% owned by Ed Carter, the Company’s Chief Executive Officer, Secretary and sole director until April 1, 2020 (see
Item 5.02 below), and 49.4% owned by Cliff Rhee, a significant stockholder of the Company. Messrs. Carter and Rhee share voting
and dispositive control over the Broken Circuit shares.
Pursuant to the terms of the Restructuring
Agreement, effective as of the closing, which occurred on March 31, 2020 (the “Closing”), Santa Monica, on its
own behalf and on behalf of the Santa Monica Parties (as hereinafter defined), agreed to relinquish, release and waive any and
all rights relating to, and interests in, and to all of the assets, including the intellectual property of Ngen Texas or
its affiliates (the “Assets”), whether claimed or actual (which were claimed pursuant to a Security Agreement between
Santa Monica, Ngen Texas and Greenfield Farms Food, Inc. (“Greenfield”), the prior parent company of Ngen Texas),
other than the rights granted in the Restructuring Agreement (the “Relinquishment”). In exchange for the
Relinquishment and as consideration therefore, at the Closing the Company issued to Santa Monica (i) the Note (as hereinafter
defined), and (ii) the Warrant (as hereinafter defined). The exchange as set forth in this paragraph is referred to herein as
the “Exchange.”
The Restructuring Agreement provides
that effective as of the Closing, and subject to completion of the Exchange, the Security Agreement and any and all Ngen Texas
Agreements (as hereinafter defined) will be deemed automatically terminated with no further action of any person, and each
of the foregoing will be of no further force and effect, and the security interest granted in the Security Agreement therein will
be deemed released and of no further force or effect. As used herein, “Ngen Texas Agreements” refers, collectively,
to certain promissory notes of Ngen Texas, certain warrants of Ngen Texas, and any and all other notes, debentures, securities
and similar instruments between any of Santa Monica or certain of its affiliated persons (collectively, the “Santa
Monica Parties”) and Ngen or any of its affiliates pursuant to which Ngen or any of its affiliates owed any amounts to any
of the Santa Monica Parties, or pursuant to which any of the Santa Monica Parties have a right to acquire any debt or equity securities
of Ngen Texas or any of its affiliates.
To the extent that the Security Agreement
may not be terminated without the approval of Greenfield, as between Santa Monica, Ngen Texas and the Company, in the Restructuring
Agreement, Santa Monica acknowledged and agreed that it will no longer have any interest in, rights to, or claims to, the
collateral that is the subject of the Security Agreement. To the extent any Ngen Texas Agreement may not be terminated without
the approval of any other person, as between Santa Monica, Ngen Texas and the Company, in the Restructuring Agreement,
Santa Monica acknowledged and agreed that it will no longer have any interest in, rights to, or claims to, any such Ngen Texas
Agreement.
As
of the Closing, Santa Monica will take no further action related to a previously instituted UCC non-judicial foreclosure action
pursuant to the Security Agreement and certain of the Ngen Texas Agreements.
In the Restructuring Agreement, CareBourn LP, CareBourn LLC, More
Capital, Auctus and Santa Monica agreed to provide each other with certain “tag-along” rights, as provided in the Restructuring
Agreement, in the event that certain sales of the Company’s common stock are effected.
The
Restructuring Agreement contains customary representations, warranties and covenants.
On the Closing date, the Company also
agreed to redeem from Broken Circuit all of the shares of Company common stock held by Broken Circuit pursuant to the Redemption
Agreement (as hereinafter defined).
The foregoing is only a brief description
of the Restructuring Agreement and does not purport to be a complete description thereof. Such description is qualified
in its entirety by reference to the Restructuring Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report
on Form 8-K and is incorporated by reference herein.
Promissory
Note
On
March 31, 2020, the Company issued a promissory note in the principal amount of $774,202 (the “Note”) to Santa Monica.
The Note matures on March 31, 2021. The Note bears interest at the rate of 18% per annum, simple interest, commencing on the issue
date. The principal amount of the Note and all accrued and unpaid interest on the Note will be due and payable in full on the
earlier of (i) the maturity date, or (ii) the date on which a Change in Control (as hereinafter defined) of the Company occurs.
A “Change in Control” shall be deemed to have occurred if, after the issue date, there shall have occurred any of
the following:
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(i)
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A
complete dissolution or liquidation of the Company, or similar occurrence;
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(ii)
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The
consummation of a merger, consolidation, acquisition, separation, reorganization, or similar occurrence, in a single transaction
or a series of related transactions, where the Company is not the surviving entity or where the shareholders of the Company
immediately prior to the consummation of such transaction do not continue to hold at least a majority of the voting power
of the Company following the consummation of such transaction; or
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(iii)
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A
sale or transfer of all or substantially all of the assets of the Company, each in a single transaction or a series of related
transactions.
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The
Company may prepay all or a portion of the principal amount and any accrued and unpaid interest and any and all other amounts
that may be due and payable to Santa Monica under the Note at any time.
The
foregoing is only a brief description of the Note and does not purport to be a complete description thereof. Such description
is qualified in its entirety by reference to the Note, a copy of which is filed as Exhibit 10.2 to this Current Report on Form
8-K and is incorporated by reference herein.
Warrant
On
March 31, 2020, the Company issued a warrant to purchase shares of Company common stock to Santa Monica. Pursuant to the terms
of the Warrant, Santa Monica is entitled to subscribe for and purchase from the Company 1,405,500 shares of Company common stock
(subject to adjustment as set forth in the Warrant) (the “Warrant Shares”), at an exercise price of $0.0000071149
per share, as adjusted pursuant to the terms of the Warrant. The aggregate number of Warrant Shares is intended to represent a
percentage equal of 31.52% of the total issued and outstanding shares of the Company as of the issue date, assuming, for the purposes
of the calculation, the full exercise of the Warrant as of the issue date, and the inclusion of all Warrant Shares in the outstanding
number of shares. In the event that, following the issue date and prior to full exercise of the Warrant, the Company and Santa
Monica determine that there are in excess of, or less than,, 3,053,620 shares of Company common stock issued and outstanding as
of the issue date, the number of Warrant Shares will be automatically adjusted such that the number of Warrant Shares equals 31.52%
of the total issued and outstanding shares of the Company, as of the issue date, assuming, for the purposes of the calculation,
the full exercise of the Warrant, as of the issue date, and the inclusion of all Warrant Shares in the outstanding number of shares.
Subject
to the terms of the Warrant, the Warrant may be exercised at any time or from time to time during the 10-year period commencing
on the issue date and ending on the tenth anniversary of the issue date.
The
Warrant may be exercised, in whole or in part, by (i) the presentation to the Company of a duly executed notice of exercise specifying
the number of Warrant Shares to be purchased, and (ii) delivery of payment of the aggregate applicable exercise price. However,
if the “Fair Market Value” (as hereinafter defined) of one share of Company common stock is greater than the exercise
price, Santa Monica may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to
the value of the Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender
of the Warrant and a notice of exercise, in which event the Company shall issue to Santa Monica a number of shares of Company
common stock computed using the following formula:
X
= Y (A-B)
A
Where:
X
= the number of Warrant Shares to be issued to Holder.
Y
= the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation).
A
= Fair Market Value of a Warrant Share at the date of such calculation.
B
= Exercise Price, as adjusted to the date of calculation.
For
purposes of the Warrant, the per share “Fair Market Value” means (i) if the Company’s common stock is then listed
for trading on the OTC Markets or a United States or Canadian national securities exchange (as applicable, the “Trading
Market”), the highest traded price of the Company’s common stock during the 20-day period during which the common
stock is then tradeable on the primary Trading Market prior to the date of the applicable exercise notice or (ii) if the Company’s
common stock is not then listed for trading on the OTC Markets or a United States or Canadian national securities exchange, the
per share fair market value of the Warrant Shares as is determined in good faith by the Board after taking into consideration
factors it deems appropriate, Including, without limitation, recent sale and offer prices of the capital stock of the Company
in private transactions negotiated at arm’s length.
The
number and kind of securities purchasable upon the exercise of the Warrant and the exercise price therefor shall be subject to
adjustment from time to time upon the occurrence of certain events, including stock splits, stock dividends, or share issuances,
as provided in the Warrant.
The
Company will not effect any exercise of the Warrant, and Santa Monica will not have the right to exercise any portion of the Warrant,
to the extent that after giving effect to the conversion set forth on the applicable notice of exercise, Santa Monica and its
affiliates would beneficially own in excess of 9.99% of the Company’s common stock outstanding immediately after giving
effect to the issuance of shares of common stock issuable upon exercise of the Warrant.
The
foregoing is only a brief description of the Warrant and does not purport to be a complete description thereof. Such description
is qualified in its entirety by reference to the Warrant, a copy of which is filed as Exhibit 10.3 to this Current Report on Form
8-K and is incorporated by reference herein.
Redemption
Agreement
On March 31, 2020 and as required by
the Restructuring Agreement, the Company entered into that certain Stock Redemption Agreement (“Redemption Agreement”)
by and between the Company and Broken Circuit. Pursuant to the terms of the Redemption Agreement, Broken Circuit agreed to sell
and the Company agreed to purchase 33,770,389 of the Company’s common stock owned by Broken Circuit in exchange for an aggregate
purchase price of $1.00.
The
Redemption Agreement contains customary representations, warranties and covenants. The foregoing is only a brief description of
the Redemption Agreement and does not purport to be a complete description thereof. Such description is qualified in its entirety
by reference to the Redemption Agreement, a copy of which is filed as Exhibit 10.4 to this Current Report on Form 8-K and is incorporated
by reference herein.