Item 1.01 – Entry into a Material Definitive Agreement
On September 1, 2020, we entered into a Multipurpose Agreement (the “Agreement”) with M2B Funding Corp., a Florida corporation (“M2B”) to, among other things as stated below, restrict the public trading of a certain number of its shares for the consideration provided for in the Agreement.
From January 2020 to May 2020, we sold and issued fifteen (15) Convertible Promissory Notes (collectively, the “Original Notes”) in favor of M2B with an aggregate principal balance of $985,555.54 and an aggregate accrued and unpaid interest balance of $59,771 as of September 1, 2020.
Also at September 1, 2020, M2B has converted $13,888 of the principal amount under the Original Notes into 603,865 of our common stock (the “Conversion Shares”). MB2 has agreed to not dispose of any shares of our common stock into the public markets, other the Conversion Shares, through and including November 30, 2020 (the “Lock-Up Period”). In addition, during each calendar month following the conclusion of the Lock-up Period, the aggregate number of shares of common stock that M2B sells into the public markets, excluding the Conversion Shares, shall not exceed 10% of the number of shares of common stock that were traded in the public market during the immediately preceding month.
Upon a principal prepayment of $150,000.00 and the payment of any accrued but unpaid interest thereon at 12% from September 1, 2020 through and including November 30, 2020, the term of the Lock-up Period shall be extended through and including February 28, 2021, without the requirement of any further action by us or M2B.
As further provided for in the Agreement, we issued a new note (the “Amalgamated Note”) to M2B that replaced the Original Notes. The Amalgamated Note has a principal amount of $1,045,326.96, interest at 12% per annum and payable starting on October 1, 2020, may be prepaid within 185 days at 120% of principal and accrued interest, and may be converted into our common stock after 90 days at a conversion price of 75% of the lowest trading price during the 10 days prior to the conversion date. The Amalgamated Note has other provision related to right of first refusal and restrictions on future borrowings, among others.
We also issued another promissory note (the “Additional Note”) to M2B. The Additional Note has a principal amount of $300,000, interest at 12% per annum and payable starting on October 1, 2020. This note is not convertible into our common stock. The Additional Note has other provision related to right of first refusal and restrictions on future borrowings, among others.
Upon the commencement of trading of the Company’s Common Stock on the New York Stock Exchange, the NYSE American, or the Nasdaq Stock Market, all outstanding amount balances of the Amalgamated Note and Additional Note would be automatically converted into shares of our common stock at the conversion rate stated above.
Finally, we are required to tender to M2B 10% of any proceeds we receive from our Regulation A offering for prepayment purposes up to the extent of any outstanding balances that are due under the Amalgamated Note or the Additional Note.
The foregoing description of the Agreement, the Amalgamated Note and the Additional Note does not purport to be complete and is qualified in its entirety by reference to the complete text of the Agreement, the Amalgamated Note and the Additional Note filed as Exhibits 10.1, 4.1 and 4.2 hereto and incorporated herein by reference.