Item 1.01 Entry into a Material Definitive
Agreement
On September 16, 2020, Innovative Payment
Solutions, Inc. (the “Company”), entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”)
with Iroquois Master Fund Ltd. (the “Investor”), pursuant to which the Company received $199,500 in exchange for the
issuance of:
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a 10% Original Issue Discount Convertible
Note (the “Note”) in the principal amount of $228,000; and
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a five-year warrant (the “Warrant”)
to purchase 6,514,286 shares of the Company’s common stock at an exercise price of $0.05 per share.
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The transactions contemplated under the
Securities Purchase Agreement closed on September 17, 2020. The Notes mature in 12 months, bear interest at a rate of 10% per annum,
and are initially convertible into the Company’s common stock at a conversion price of $0.035 per share (as adjusted for
stock splits, stock combinations, dilutive issuances and similar events).
The Note may be prepaid at any time for
the first 90 days at face value plus accrued interest. From day 91 through day 180, the Notes may be prepaid in an amount equal
to 115% of the principal amount plus accrued interest. From day 181 through day 365, it may be prepaid in an amount equal to 125%
of the principal amount plus accrued interest. The Note contains certain covenants, such as restrictions on: (i) distributions
on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets.
The Note and the Warrant contain conversion
limitations providing that a holder thereof may not convert the Note or exercise the Warrant to the extent (but only to the extent)
that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99%
(the “Maximum Percentage”) of the outstanding shares of the Company’s common stock immediately after giving effect
to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company
provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after
such notice.
In connection with the Securities Purchase
Agreement, the Company entered into a Registration Rights Agreement, dated September 16, 2020 (“Registration Rights Agreement”),
with the Investor pursuant to which it is obligated to file a registration statement with the SEC within ninety (90) days after
the date of the agreement to register the resale by the Investor of shares of the Company’s common stock issuable under the
Notes and upon exercise of the Warrants, and use all commercially reasonable efforts to have the registration statement declared
effective by the SEC within one hundred five (105) days after the registration statement is filed.
Upon the occurrence of an event of default
under the Notes, the Investor has the right to be prepaid at 140% of the outstanding principal balance and accrued interest, and
interest accrues at 18% per annum (or the maximum amount permitted by law). In addition, if an event of default under in the Notes
has occurred, regardless of whether it has been cured or remains ongoing, the Notes will thereafter be convertible at 65% of the
lowest closing price of the Company’s common stock for the last 10 consecutive trading days.
The Note and the Warrant were sold pursuant
to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and Rule 506 of Regulation D promulgated thereunder. The Investor is an accredited investor which has purchased
the securities as an investment in a private placement that did not involve a general solicitation. The shares to be
issued upon conversion of the Note and the exercise of the Warrants have not been registered under the Securities Act and may not
be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration
requirements. This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy, nor
shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the
registration or qualification under the securities laws of any such state.
The foregoing description does not purport
to be complete and is qualified in its entirety by reference to the full text of the Form of Note, the Warrant, the Securities
Purchase Agreement and the Registration Rights Agreement, attached hereto as Exhibits 4.1, 4.2, 10.1 and 10.2, respectively, each
of which are incorporated herein by reference.