|
Item
1.01
|
Entry
into a Material Definitive Agreement.
|
Equity
Purchase Agreement and Registration Rights Agreement
On
February 7, 2020 (the “Closing Date”), Frélii, Inc. (the “Company”) entered into an Equity Purchase
Agreement (the “Purchase Agreement”) with Crown Bridge Partners, LLC, a New York limited liability company (the “Investor”)
pursuant to which the Investor committed to purchase up to $2,500,000 (the “Maximum Amount”) of the Company’s
common stock, par value $0.001 (the “Common Stock”) (the “Financing”). In connection with the Financing,
on the Closing Date, the Company and the Investor also entered into a Registration Rights Agreement (the “Registration Rights
Agreement”).
Upon
filing and effectiveness of the Company’s Registration Statement on Form S-1 and provided other closing conditions are met,
from time to time over the term of the Purchase Agreement, the Company shall have the right, but not the obligation, to direct
the Investor to purchase shares of Common Stock (the “Put Shares”) in a minimum amount of not less than $10,000, and
a maximum amount of $175,000, provided that the number of Put Shares shall not exceed 200% of the Average Daily Trading Volume
(as defined in the Purchase Agreement). At any time and from time to time during the 3-year term of the Purchase Agreement (the
“Commitment Period”), the Company may deliver a notice to Investor (the “Put Notice”) and shall deliver
the Put Shares to Investor via DWAC (as defined in the Purchase Agreement) within two Trading Days (as defined in the Purchase
Agreement). The purchase price (the “Purchase Price”) for the Put Shares shall equal 82% of the lesser of (i) the
lowest daily volume weighted average price on the Principal Market (as defined in the Purchase Agreement) (as reported by Bloomberg
Finance L.P.) during the ten Trading Days immediately following the date the Investor receives the Put Shares via DWAC associated
with the applicable Put Notice; and (ii) the lowest traded price of the Common Stock during the period of five (5) Trading Days
following the Clearing Date (as defined in the Purchase Agreement) associated with the applicable Put Notice (the “Valuation
Period”). The closing of a Put Notice shall occur within three trading day following the end of the respective Valuation
Period, whereby (i) the Investor shall deliver the Investment Amount (as defined below) to the Company by wire transfer of immediately
available funds and (ii) Investor shall return surplus Put Shares if the value of the Put Shares delivered to the Investor causes
the Company to exceed the maximum commitment amount. The Company shall not deliver another Put Notice to Investor within ten trading
days of a prior Put Notice. The “Investment Amount” means the aggregate Purchase Price for the Put Shares purchased
by the Investor, minus clearing costs payable to the Investor’s broker or to the Company’s transfer agent for the
issuance of the Put Shares (the “Clearing Costs”).
The
right of the Company to issue and sell the Put Shares to the Investor is subject to the satisfaction of certain closing conditions,
including, but not limited to, (i) the Company’s Registration Statement on Form S-1 registering for resale by the Investor
of the Put Shares and Commitment Shares (the “Registration Statement”) being declared effective by the U.S. Securities
and Exchange Commission, (ii) accuracy of the Company’s representations and warranties, (iii) the Company’s performance
under the Purchase Agreement in all material respects, (iv) no suspension of trading or delisting of Common Stock, (v) limitation
of the Investor’s beneficial ownership to no more than 9.99%, (vi) the Company maintaining its DWAC-eligible status, (vii)
the Company maintaining a sufficient share reserve, and (viii) the lowest traded price of Common Stock in the twenty-five (25)
Trading Days immediately preceding the respective Put Shares must exceed $0.01.
At Closing, the Company issued to the Investor a convertible promissory
note in the principal amount of $25,000 to the Investor for its commitment to enter into the Purchase Agreement (the “Commitment
Note,” and together with the Purchase Agreement and Registration Rights Agreement, the “Transaction Documents”).
The Commitment Note shall be earned in full upon the execution of this Purchase Agreement, and the issuance of the Commitment Note
is not contingent upon any other event or condition, including but not limited to the effectiveness of the Registration Statement
or the Company’s submission of a Put Notice to the Investor. In addition, the Investor shall withhold $5,000 from the Investment
Amount with respect to the first Put under this Agreement for reimbursement of Investor’s expenses relating to the preparation
of this Agreement.
Pursuant
to the terms of the Registration Rights Agreement, the Company agreed to file the Registration Statement by March 23, 2020.
Pursuant
to the terms of the Purchase Agreement and to satisfy the reserve obligation in the Commitment Note, the Company is required to
reserve and keep available out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least
three times the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant
to the Transaction Documents
While
the Company has the obligation to maintain such reserve while the Purchase Agreement is effective, the Company does not have the
obligation to sell any Put Shares to the Investor. Neither the Investor, nor any affiliate of the Investor acting on its behalf
or pursuant to any understanding with it, will execute any short sales during the period from the date hereof to the end of the
Commitment Period.
The
Transaction Documents contain customary affirmative and restrictive covenants and representations and warranties, as well as customary
indemnification obligations by each party.
With
regard to the purchase and resale of the Put Shares, the Investor is an “underwriter” within the meaning of the Securities
Act of 1933, as amended (the “Securities Act”). Any broker-dealers or agents that are involved in resales of the Put
Shares may be deemed “underwriters.” The Company will receive net proceeds from the sale of the Put Shares directly
to the Investor pursuant to the Purchase Agreement, however, the Company will not receive any proceeds from the resale of the
Put Shares by the Investor thereafter.
The
Transaction Documents contain customary representations, warranties and agreements by the Company, customary conditions to closing,
indemnification obligations of the Company and the Investor, including for liabilities under the Securities Act, and other obligations
of the parties and termination provisions. The representations, warranties and covenants contained in the Transaction Documents
were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such documents,
and may be subject to limitations agreed upon by the contracting parties.
The foregoing descriptions of the Purchase Agreement and the Registration
Rights Agreement are only summaries of the material terms of such agreements and do not purport to be complete and are qualified
in their entirety by reference to the full text of the forms of such agreements, which
are filed as Exhibits 10.1 and 10.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
Convertible
Redeemable Promissory Note
The Company issued a Convertible Promissory Note with the Investor
(the “Note”), whereby the Investor purchased the Note from the Company, for a purchase price of $67,000 (the “Purchase
Price”) in the principal amount of $75,000. The Purchase Price was funded on February 7, 2020, pursuant to a Securities Purchase
Agreement containing such representations, warranties and covenants as are typical for a transaction of this nature.
The Note is due and payable
on July 30, 2020 (the “Maturity Date”) and entitles the holder to 10% interest per annum. Investor shall have the right
at any time to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of this Note
into fully paid and non-assessable shares of common stock at a conversion price equal to $0.25.
The Note contains customary
default events which, if triggered and not timely cured, will result in default interest and penalties.
The foregoing provides only a brief description of the material
terms of the Note, and does not purport to be a complete description of the rights and obligations of the parties thereunder, and
such descriptions are qualified in their entirety by reference to the full text of the form of the Note, filed as an exhibit to
this Current Report on Form 8-K, and are incorporated herein by reference.