Item
2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of the Registrant.
On
April 5, 2021, the Company and DSSI entered into a Securities Purchase Agreement, pursuant to the Binding Letter of Intent discussed
above. Under the terms of the Securities Purchase Agreement, the Company issued: (a) a Convertible Promissory Note in the principal amount
of $30.0 million (the “Note”) in favor of DSSI, and (b) a detachable Warrant to purchase up to 150,000,000 shares of the
Company’s Class A Common Stock, at $0.22 per share.
The
Note bears interest at the annual rate of 8% and matures on April 5, 2024, subject to certain acceleration provisions upon the occurrence
of an Event of Default, as defined in the Note. Interest on the Note is prepayable annually in cash or in shares of the Company’s
Class A Common Stock, at the option of the Company, except that interest for the first year is prepayable in shares of the Company’s
Class A Common Stock, at the rate of $0.20 per share. Borrowings under the Note may be prepaid without penalty, in full or in part, at
the option of the Company, at any time after the first anniversary of the Note. At any time during the term of the Note, all or part
of the Note, including principal, less unamortized prepaid interest, if any, plus any accrued interest and other fees can be converted
into shares of the Company’s Class A Common Stock at the rate of $0.20 per share, at the option of the holder.
The
detachable Warrant confers the right to purchase up to 150,000,000 shares of the Company’s Class A Common Stock, is fully vested
and may be exercised at any time on or before April 5, 2026, at the exercise price of $0.22 per share.
In
connection with the loan, the Company agreed to pay to DSSI a loan Origination Fee of $3.0 million, payable in shares of the Company’s
Class A Common Stock, at the rate of $0.20 per share. Accordingly, upon funding of the loan, the Company will issue to DSSI 27,000,000
shares of its Class A Common Stock, including 15,000,000 shares in payment of the loan Origination Fee and 12,000,000 shares in prepayment
of interest for the first year.
Proceeds
from the loan are to be deposited in a special purpose bank account and are intended primarily to fund the Company’s domestic and
international growth initiatives. The Company’s Board of Directors retained oversight and delegated control responsibility to a
specified Company Director, who also holds an executive position with DSS. The Company’s Board of Directors has stipulated that
authority to disburse funds from the designated bank account is delegated to: (a) the specified Director acting together with (b) the
Company’s Chief Executive Officer or the Company’s Chief Financial Officer.
Shareholder
approval will be required to increase the number of authorized shares of the Company’s Class A Common Stock for the potential conversion
of 100% of the Note. Under the terms of the Securities Purchase Agreement, the Company has agreed to seek such shareholder approval on
or before July 30, 2021.