Item 1.01
Entry into a Material Definitive Agreement
On February 3, 2021, Innovative Payment Solutions,
Inc. (the “Company”), entered into a Securities Purchase Agreement (the “Securities Purchase Agreements”)
with each of Iroquois Master Fund Ltd. (“Iroquois”), Mercer Street Global Opportunity Fund, LLC (“Mercer”)
and Cavalry Fund I LP. (“Cavalry”, and together with Iroquois and Mercer, the “Investors” and each an “Investor”),
pursuant to which the Company received $199,500, $250,250 and $150,500, respectively, in exchange for the issuance of:
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12.5% Original Issue Discount
Convertible Notes (the “Notes” and each a “Note”) in the principal amounts of $228,000, $286,000 and $172,000
issued to each of Iroquois, Mercer and Calvary, respectively ; and
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five-year warrants (the “Warrants”)
to purchase 5,066,667, 6,355,556 and 3,822,223 shares of the Company’s common stock at an exercise price of $0.05 per share
to each of Iroquois, Mercer and Cavalry, respectively.
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The transactions contemplated under the Securities
Purchase Agreements closed on February 3, 2021. 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 $0.045 per share (as adjusted for stock splits,
stock combinations, dilutive issuances and similar events).
The Notes 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, each Note may be prepaid in an amount equal to
125% of the principal amount plus accrued interest. The Notes contain certain covenants, such as restrictions on: (i) distributions
on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets.
Each Note and Warrant contains conversion limitations
providing that a holder thereof may not convert such Note or exercise such 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
Agreements, the Company entered into a Registration Rights Agreement, each dated February 3, 2021 (the “Registration Rights
Agreements” and each a “Registration Rights Agreement”), with each of the Investors 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 Investors of the 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, each 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 a Note has
occurred, regardless of whether it has been cured or remains ongoing, such Note 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 Notes and Warrants 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 Investors are accredited investors who have 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 Notes 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.